Alert: Time could be running out to buy these Brexit-proof FTSE 100 stocks

Brexit is coming and these FTSE 100 (INDEXFTSE: UKX) stocks could help you ride out the mayhem, says Rupert Hargreaves.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Brexit uncertainty is the most significant risk UK investors face over the next six months. With this in mind, today I’m looking at two FTSE 100 stocks that I believe will continue to thrive, no matter what deal emerges from the chaos.

Away from home

A disorderly Brexit might throw the UK economy into turmoil, but no matter how widespread the fallout, FTSE 100 member Rentokil Initial (LSE: RTO) is unlikely to see a significant drop off in business.

Specialising in pest control and hygiene products, Rentokil is, in my opinion, one of the FTSE 100’s most defensive stocks. Rodents don’t take time off — no matter how poorly the rest of the economy is faring.

What’s more, only around 10% of the company’s revenue comes from the UK. The firm also has operations in North America, Europe, Asia and the Pacific region. It’s been growing steadily in these regions by acquiring smaller businesses that offer good growth potential, using a mix of cash flow from operations and debt, buying from owner-operators, and then using its experience to reduce costs and improve sales.

So far, this strategy has been highly effective. Net profit has jumped four-fold over the past five years, and the dividend has increased by more than 100%. 

As long as the business doesn’t overstretch itself, I see no reason why this trend cannot continue. There’s still plenty of smaller operators out there to merge into the larger group, which should support revenue growth for many years to come. Indeed, the company acquired 16 new bolt-on businesses in the third quarter alone.

Granted, shares in Rentokil aren’t cheap — they’re currently changing hands for 22.5 times forward earnings — but considering the group’s future potential and international diversification, I reckon the stock deserves this premium multiple.

Focus on emerging markets

Rodents don’t take off, and neither does commodities trader Glencore (LSE: GLEN). No matter what happens to the UK after Brexit, this business, which also has operations around the world, is unlikely to see any significant impact on its performance.

Glencore is a unique business in the commodities world. It’s the world’s largest trader of commodities, such as grain and oil, but it’s also a significant producer of commodities, such as coal, copper, nickel and cobalt. The last two of these are vital components in the battery packs of electric vehicles, which will act as a hedge against falling demand for coal. 

Glencore doesn’t expect the demand for coal to tail off anytime soon, either. In a recent presentation, the company told investors an extra 1bn tonnes of coal fired-power capacity was currently under construction around the world, underpinning demand for as much as 250m in additional coal production over next five years.

With the UK committed to phasing out dirty fuels such as coal, it’s difficult to think of this as a growth business for Glencore, but that’s what management seems to believe. It also means the company is highly insulated from Brexit fallout. A dividend yield of 5.9% only sweetens the attraction, in my opinion.

Glencore might not be everyone’s cup of tea, but this global commodities trader is, in my view, one of the most Brexit-proof stocks in the FTSE 100.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

UK money in a Jar on a background
Investing Articles

With a 10.1% yield, should I buy this FTSE 250 income stock?

Our writer looks at an income stock that’s kept its dividend unchanged for five years. But is it high enough…

Read more »

Investing Articles

Up 23% in a month, can this FTSE 100 stock continue to soar?

Airtel Africa's recently been the FTSE 100’s top-performing stock. With huge opportunities for growth ahead, is it set to continue?

Read more »

Investing Articles

£20,000 in savings? Here’s how an investor could use it to target an eventual £980 of passive income each month

Our writer demonstrates how an investor could aim to earn close to £1,000 each month in passive income from a…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

£10,000 invested in the S&P 500 at the start of 2025 is now worth…

Since the start of the year, the S&P 500's underperformed the FTSE 100. And Stephen Wright thinks investing in the…

Read more »

Investing Articles

Is this a turning point for the Diageo share price?

The Diageo share price is at an eight-year low. Is this FTSE 100 favourite simply too cheap to ignore? Roland…

Read more »

Investing Articles

As the FTSE 100 hits record highs, should I sell my shares and buy an index fund?

Our writer’s portfolio lagged the FTSE 100 last year, but he’s not giving up on stock-picking and highlights a recent…

Read more »

Happy young plus size woman sitting at kitchen table and watching tv series on tablet computer
Investing Articles

£10,000 invested in Lloyds shares 6 months ago is now worth…

Lloyds shares have performed well over 12 months but have broadly disappointed investors over the long run. Dr James Fox…

Read more »

Investing Articles

£20,000 in savings? Here’s how investors can aim for a £4,000 monthly second income

Millions of investors use the Stocks and Shares ISA as a vehicle to build wealth and generate a second income.…

Read more »