Investors buy tickets to ride Brexit rocket
ORDINARY investors are delighted at the boost that Brexit has given stocks and shares and are lining up to invest in the UK’s future.
New research from The Share Centre shows that more than half are happy with the result of the referendum and say its immediate impact has been more positive than they expected.
Investors are feeling bullish about today’s investment prospects, with 44 per cent saying market volatility has created positive opportunities, against just 23 per cent who say it has made them reluctant to invest.
Brexit has lifted the FTSE 100 to more than 6,700, almost six per cent higher than on referendum day on June 23.
Blue chip companies on the index generate more than three quarters of their earnings overseas, which are worth more converted back into sterling, as it has fallen around 10 per cent since the referendum. In a further boost, this makes British exports relatively cheaper for foreign buyers.
The FTSE 250 index of medium-sized UK companies has also recovered strongly after its early battering.
Now share analysts say there are plenty of opportunities for investors who are willing to take advantage of the surge in sentiment as Project Fear’s Brexit meltdown stubbornly refuses to happen. TAKING STOCK If you are brave enough to invest in individual stocks, Helal Miah, investment research analyst at The Share Centre, picks out three UK-listed companies that should benefit from Brexit.
His first choice is Reckitt Benckiser, the world’s largest producer of household goods, whose brands include Cillit Bang, Clearasil, Vanish, Harpic and Airwick.
“These are everyday necessities which means sales remain strong even when the economy slows, giving relatively steady earnings and cash flow.”
Miah also tips pharmaceutical giant Glaxo Smith Kline, which generates large overseas sales from its growing pipeline of drugs and treatments. The stock is relatively low-risk but has risen 17 per cent since Brexit and its dividend offers a generous income of almost five per cent a year.
Savers who are worried that interest rates may fall next month can also secure a healthy dividend income by investing in electricity network provider National Grid, which currently yields around 4.30 per cent a year.
Miah says: “This income should rise at least in line with inflation, giving you protection against rising prices.” INCOME TIPS Chris Beauchamp, senior market analyst at spread betting firm IG, tips telecommunications giant Vodafone: “It offers a healthy dividend of nearly five per cent a year and generates growing revenues from countries such as India and Turkey, which should offset any slowdown in Europe.”
The cheaper pound has inspired takeover bids from foreign companies, with microchip maker ARM Holdings an early target.
Senior analyst at Hargreaves Lansdown Laith Khalaf says other acquisitions may follow and this would boost their share prices, which could prove profitable for existing investors.
ITV is a possible target. “US media giant Liberty Global holds a 9.9 per cent stake and sterling’s fall would reduce the cost of acquiring the rest of the company,” he says.
Khalaf says some top companies have been unfairly punished by the post-Brexit panic, notably insurance giant Legal & General, whose share price is down around 20 per cent.
“Yet L&G’s profitability is good, its capital levels are strong and it has reported minimal disruption since Brexit,” he says.
Finally, Khalaf tips Merlin Entertainments, which owns the rights to visitor parks around the world, including Legoland, Madame Tussauds, Sea Life centres and Alton Towers.
This is another company which will benefit from the weaker pound. “It earns more than two thirds of its money overseas and this is set to rise as it opens new theme parks in China.”
Russ Mould, investment director at online platform AJ Bell, says emergency power specialist Aggreko makes more than 70 per cent of its sales in US dollars. “It reports its earnings next week and should see a really favourable currency benefit.” FUND OF IDEAS If individual company stocks are too risky for you, it may be wiser to spread your money across several funds, possibly using your tax-free individual savings account (ISA) allowance.
Damien Fahy, director of personal finance website MoneyToTheMasses.com, tips Evenlode Income from Wise Investments, which invests in large UK companies with global revenues, exactly the type of firm benefiting most from Brexit. Alternatively you could invest via a cheap tracker fund such as the HSBC FTSE 100 Index.
Fahy also tips the popular Fundsmith Equity, which invests in global firms with strong cash flows, resilient business models and attractive valuations which should help offset UK risks.
Many feel the Brexit shock has been overdone and sterling and our economy are due a revival.
Managing director at Chelsea Financial Services Darius McDermott says if this happens it would help small and mediumsized UK companies.
McDermott tips Marlborough UK Micro Cap Growth and Liontrust UK Smaller Companies. “Both are very experienced and successful managers and will benefit if the UK sees an economic boost.”