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5 British Stocks to Buy as No-Deal Brexit Fears Fade

Swarup Gupta

With the threat of a no-deal Brexit receding, Britain’s economy is showing signs of revival. The country’s services sector, which towers over its economy, improved significantly last month. Additionally, consumer spending likely rose in April buoyed by the Brexit delay and favorable weather, per a new survey.

Another study indicates that prominent British investors believe that Brexit will be favorable for Britain’s economy. Additionally, figures from the European Commission indicate that the country’s economy will outperform its EU peers this year. Given these factors, it makes sense to invest in select British stocks.  

Services Improve, Spending Rises

The British economy staged a partial recovery last month with businesses shrugging off fears of a no-deal Brexit. In April, the IHS Markit CIPS services sector purchasing managers’ index increased to 50.4. This represents a moderate recovery from March’s level of 48.9, the lowest level in 32 months.

Additionally, a survey from Barclaycard indicated that Britain’s consumer spending increased by 2.5% in April. The headline number was boosted by a 13% increase in expenditure at pubs and a 10% rise in spending at restaurants.

The delay in Brexit and warm weather were the primary catalysts for this improvement. As a result, the number of Britons exuding confidence in the economy increased from 26% in March to 33% in April.

Affluent Investors Bullish on Brexit

A fresh survey from UBS Global Wealth Management reveals that most wealthy Britain-based investors believe that the country’s economy will gain from Brexit. Released on May 7, the report is the product of a poll of more than 3,600 global investors with a minimum investable asset size of $1 million.

More than 60% of high net worth investors said they felt confident about Britain’s economy as far as the next decade is concerned. Also, 44% had a bullish outlook for the next 12 months. And 41% believe that Brexit will provide a boost to the British economy. Of the survey’s respondents, 338 were British investors.

Britain’s Economy Likely to Outperform Eurozone Peers

On May 7, the European Commission said the Eurozone is likely to expand at a pace of 1.2% this year, lower than its earlier forecast of 1.3% released in February. However, Britain’s economy is expected to grow at a pace of 1.3% this year, outperforming the wider Eurozone.

This is significantly better than the region’s economic powerhouse Germany, which is expected to expand at only 0.5%. The country has been weighed down by President Trump’s trade war, which led to a fall in sales of diesel cars.

The outlook for Italy is far grimmer. Brussels has cut the country’s 2019 growth forecast to a paltry 0.1% from an already dismal 0.2%. The reduction has already generated much discontent from Italy’s government, which has characterized the prediction as “prejudiced.”

Our Choices

With the threat of a no-deal Brexit receding, Britain’s economy is showing signs of resurgence. Its dominant services sector staged a modest recovery last month even as consumer spending picked up. Further, wealthy British investors believe that Brexit will be beneficial for the country’s economy.

Additionally, Britain’s economy is projected to outperform its Eurozone peers this year. This is why it makes sense to invest in British stocks. However, picking winning stocks may prove to be difficult.

This is where our VGM Score comes in. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM Score. 

We have narrowed down our search to the following stocks based on a good Zacks Rank and a VGM Score of A.

Unilever PLC UL is a London-based FMCG company with worldwide operations.

Unilever has a Zacks Rank #1 (Strong Buy). The company’s expected earnings growth for the current year is 3.3%.The Zacks Consensus Estimate for the current year has improved by 0.7% over the past 30 days.

Prudential plc PUK provides retail financial products and services and fund management to many millions of customers worldwide. The company is based in London.

Prudential’s Zacks Consensus Estimate for the current year has improved by 3.4% over the past 30 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

Capri Holdings Limited CPRI is a London-based global luxury lifestyle company.

Capri Holdings has a Zacks Rank #2 (Buy). The company has expected earnings growth of 9.5% for the current year.

Dunelm Group plc DNLMY is a homewares retailer in the United Kingdom.

Dunelm Group has a Zacks Rank #2. The company has expected earnings growth of 16.7% for the current year. The Zacks Consensus Estimate for the current year has improved by 3.3% over the past 30 days.

Halfords Group plc HLFDY is a UK-based company engaged in the retail of automotive, cycling products as well as auto repair.

Halfords Group has a Zacks Rank #2. The company has expected earnings growth of 2.2% for the current year. The Zacks Consensus Estimate for the current year has improved by 1.5% over the past 60 days.

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Unilever PLC (UL) : Free Stock Analysis Report
 
Prudential Public Limited Company (PUK) : Free Stock Analysis Report
 
DUNELM GP PLC (DNLMY) : Free Stock Analysis Report
 
Capri Holdings Limited (CPRI) : Free Stock Analysis Report
 
Halfords Group Plc (HLFDY) : Free Stock Analysis Report
 
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