Finding Brexit Bargains in the U.K.

Aug. 5, 2017 1:25 a.m. ET

Dow Jones Global Indexes | Global Stock Markets

Many strategists fear the United Kingdom’s coming exit from the European Union will whack British companies, especially since the exact terms of the divorce remain unclear.

But the hand-wringing means there are Brexit bargains for brave investors willing to bet that the worst-case scenarios won’t come to pass. One place to look for deals is within sectors closely tied to the U.K. economy, which skeptics consider shaky. In their recently published midyear outlook, strategists for insurance and financial giant Allianz warn that Britain “seems set to endure a significant period of economic uncertainty and weakness now.”

The value-minded stockpickers at San Diego–based Brandes Investment Partners, on the other hand, consider such fears overblown, and they’re investing in British retailers and property-services companies. “Uncertainty tends to lead the market to price in the worst, and that’s really what we’re seeing at this point,” says Amelia Morris, a member of the firm’s international large-cap investment committee.

BRANDES GENERALLY LIKES TO BUY out-of-favor stocks, so it’s typical that these two U.K. sectors would serve as “hunting grounds,” as they “probably show the lowest optimism out there in the market.” However, she adds, companies in these groups are telling her that “they’re seeing no changes in consumer habits yet.”

Valuations and dividend yields are a big part of what Morris likes about retail and property-services shares. Among Brandes’ top 10 holdings—listed here with their

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