Britain’s Folly, Your Fortune
Last Friday, the world was shocked as Britons said to the EU, “It’s not you, it’s me,” and voted to Brexit, stage left. Nobody expected that.
Not even the voters — many of whom have been reported saying they didn’t think their votes to leave would count. That really gives some credence to Winston Churchill’s comment that “the best argument against democracy is a five-minute conversation with the average voter.”
Panic struck the global markets, and stocks around the world dropped. Three trillion dollars was erased from the global marketplace in a single day!
Everyone was trying to beat everyone else to sell their stocks before losses decimated their portfolios. Everything from manufacturing firms to established banks sold off.
But while everyone else was in a panic to get out, I was busy bargain hunting for companies that were expensive on Thursday but are on sale now. And I’ve found some really great deals so far.
I’ve got to hold onto some of them for my subscribers at The Wealth Advisory, but I’ve put together a list of five of the best Brexit deals on the market (fortunately, there are pounds of them to go around). I’ve also got a couple of diversified funds that stand to recover quite well in the coming months and years and leave savvy investors minted.
Brexit Battered Fish and Blue Chips
These are some companies that should give brave investors 50% to 100% returns over the long run — even more in some cases.
Brexit Battered Blue Chip #1: Carnival plc (NYSE: CUK)
I’m sure many Britons are interested in escaping the terrible decision they just made, but that’s not why I’m sold on buying this cruise line. Carnival, with its 2.98% dividend yield, growing positive free cash flows, and valuations that beat the industry average across all metrics (not to mention a PEG ratio of 0.8) has always been a good investment. Now that its price has been hacked by over 10% in the past few days, it’s a screaming bargain.
Brexit Battered Blue Chip #2: Ensco plc (NYSE: ESV)
Contract driller Ensco got hit by a double whammy of misfortune with oil prices dropping and then a Brexit-induced sell-off. But that same misfortune can mint savvy investors a true fortune. This stock sports an enviable valuation by any metric (numbers that would make value investor Benjamin Graham drool with anticipation). Plus, it pays investors a 3.88% dividend yield. It’s recovered some after an upgrade yesterday but is still a good 10% below its pre-Brexit price.
Brexit Battered Blue Chip #3: BP plc (NYSE: BP)
If Ensco got hit with the double whammy, then BP’s been shellacked by innumerable ones. But it’s still standing. The company has been shelling out billions to make up for its part in the devastation caused by the Deepwater Horizon oil spill for years now. Then it was hit by low oil prices. And then again by the stupidity of British voters last week. Somehow, management has succeeded in keeping it cash flow positive. And it is paying investors brave enough to jump into these turbulent waters a sweet dividend yield of 7.28%.
Brexit Battered Blue Chip #4: Prudential plc (NYSE: PUK)
International insurance provider and retirement account manager Prudential took a massive hit from Brexit-based panic. Even after recovering over 10% yesterday, it’s still a good 15% below its pre-panic price. Offering positive cash flows, a 20%+ return on equity, and a juicy 4.28% dividend yield, this is another must have for the bargain-hunting investor.
Brexit Battered Blue Chip #5: Lloyds Banking Group plc (NYSE: LYG)
Banks got hit even harder than most stocks in the Brexit sell-off. Lloyds fell over 20% on Friday and another 15%+ on Monday. Although it recovered some (about 10%) yesterday, we’re still looking at a stock over 15% off its pre-Brexit price. With over $22 billion in annual revenue, positive net income, and a 5%+ dividend yield, this is a bargain you can really bank on.
All five stocks I just mentioned are solid companies with heavily discounted prices. They’re going to weather this storm. And they’re also going bring unheard-of gains to investors wise enough to buy while others are running for the exits (or Brexits, as the case may be).
Brexit Battered Fish and Blue Chip Baskets
But if you’re worried about putting all of your crumpets in one basket, I’ve got the answer for you. Here are two diversified funds that track the UK and EU markets that also went a bit arse over tits (as our friends across the pond might say).
Brexit Battered Basket #1: iShares Core FTSE 100 (LSE: ISF.L)
Here’s a fund that tracks the 100 biggest companies that trade on the London Stock Exchange. With top holdings including AstraZeneca, HSBC Bank, and Royal Dutch Shell (to name just a few), this rock-solid ETF stands to make passive (but wise) investors a pretty penny as the shock of Brexit wears off and markets recover. Plus it pays a 2.99% yield to those brave enough to buy while others run.
Brexit Battered Basket #2: SPDR EURO STOXX 50 (NYSE: FEZ)
This fund tracks the rest of the EU and also got pummeled in the Brexit-induced panic. Top holdings include heavyweights Total SA, Bayer AG, and Allianz SE. It’s a strong fund with a low expense ratio that pays a 3.13% yield. And best of all, it’s on sale!
So if you prefer to have a manager diversify your portfolio for you, those two funds are a great option. They’re both still down from the Brexit-induced sell-off. They’re both bound to recover — leaving brave investors truly minted as they do.
As Mr. Churchill once said, “A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.” Now, let’s go out and find those opportunities!
To investing with integrity (and courage),
Jason Williams
Follow me on Twitter @AllBeingsEqual
