Keep buy­ing Sains­bury’s: it should re­cover when Brexit fears prove un­founded

The Sunday Telegraph - Money & Business - - Business -

BREXIT is likely to be up­per­most in in­vestors’ minds in 2018. Many are likely to be ap­pre­hen­sive about our im­pend­ing de­par­ture from the EU, but Questor be­lieves that an ex­cess of pes­simism has al­ready given rise to an ar­ray of op­por­tu­ni­ties for read­ers to buy un­der­val­ued shares.

The ev­i­dence that some stocks have been over­sold is com­pelling.

The fact that the FTSE 100 is flirt­ing with record highs dis­guises a fault line that runs through the stock mar­ket, di­vid­ing it in two.

This is best il­lus­trated by two new in­dices pro­duced by a com­pany called Bats. It re­cently in­tro­duced a new ri­val to the FTSE 100 that also con­sists of 100 of Bri­tain’s largest listed com­pa­nies, but it has also split this in­dex into two: one con­sists of do­mes­ti­cally

fo­cused firms that make most of their rev­enues here, and are seen as likely to suf­fer as a re­sult of Brexit, while the sec­ond group make most of their money in­ter­na­tion­ally.

The graph shows the marked di­ver­gence in the per­for­mance of these two groups.

In essence, the do­mes­tic half of the stock mar­ket has dras­ti­cally un­der­per­formed the in­ter­na­tional half, es­pe­cially since the EU ref­er­en­dum.

We think this di­ver­gence ex­ag­ger­ates the likely ef­fect of Brexit on the Bri­tish econ­omy and on the firms ex­posed to it and that as a re­sult there will be bar­gains to be found among the con­stituents of Bats’ “Brexit 50” in­dex (of­fi­cially called the Bats UK Brexit High 50). You can see the full list of con­stituents at tinyurl. com/brex­it­stocks.

Questor is not aware of a tracker fund or ETF (ex­change-traded fund)

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