Bothered by Brexit? I think this secret small-cap stock could be worth holding in 2019

Paul Summers thinks this market minnow could do well in a market downturn.

| 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.

The farce that is Brexit continues to drag on, causing businesses to worry over how they will cope if the UK crashes out of the EU on 29 March without a deal. Naturally, all the uncertainty isn’t exactly helping investor sentiment.

With this in mind, here are a couple of companies that I think could do better than most if the economy does experience problems going forward, one of which reported to the market earlier today.  

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

Primed for growth?

Given its market capitalisation of just £76m, it’s to be expected that the majority of retail investors probably won’t have heard of Begbies Traynor (LSE: BEG). I think this could be set to change over the next year.

The market minnow has been around for almost 30 years and describes itself as “the UK’s leading corporate rescue and recovery practice“. In other words, it works with companies facing financial challenges — something that could increase substantially if Brexit proves the nightmare some are predicting.

For now, however, things are moving along fairly nicely. Revenue rose by £2m to £28m in the six months to the end of October with adjusted pre-tax profit also climbing by a little over 10% to £3.2m. This was, according to the company, “ahead of a strong comparative period” and the result of an increase in the number of new insolvency appointments and previous organic investments. 

In addition to a 14% increase to the interim dividend, the Manchester-based business also announced that net debt had fallen by a little under 9% to £6.3m by the end of the reporting period. 

Looking to the full-year, Begbies stated that it was well placed to meet current expectations, although results would be second-half-weighted. 

On almost 16 times earnings for 2018/19, the stock isn’t exactly cheap, especially at a time when markets continue to look susceptible to further falls. Nevertheless, for the potential growth on offer, I think this can be justified. I own a small amount of the stock and plan on retaining it so for some time to come. 

Discount demon

Another stock that I think might be worth holding if tougher times lie ahead is FTSE 250 retailer B&M European Value Retail SA (LSE: BME). That might seem odd when the rest of the industry is on its knees, but hear me out. 

If an economic downturn really is on the way, people won’t stop spending completely. Instead, they’ll likely head towards retailers that give them more for their cash. In such a situation, B&M will surely be able to benefit from the economies of scale that befit its near-£3bn market cap and offer exactly the sort of generic goods people want when funds are tight. That’s what happened with discounters in the aftermath of the financial crisis and we can be fairly confident that it will happen again. 

That’s not to say that B&M has been immune to the sell-off in the markets over the last couple of months. In early November, the stock hit 426p a pop. Today, the very same shares can be yours for 33% less. This leaves them trading on 14 times forecast earnings (and offering a secure yield of 2.9%). 

While clearly nowhere near as cheap as some retailers — particularly those in the clothing industry such as Superdry, Marks and Spencer and Quiz — again, I feel that this relatively high price can be justified.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Paul Summers owns shares in Begbies Traynor Group. 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

man in shirt using computer and smiling while working in the office
Investing Articles

Is Scottish Mortgage Investment Trust now a bargain growth stock?

The Scottish Mortgage Investment Trust share price has plummeted nearly 50% from its 52-week high. Is this a great opportunity…

Read more »

A couple celebrating moving in to a new home
Investing Articles

2 key stock picks for reliable passive income

I’m looking at stocks that can deliver reliable passive income to complement my growth picks, and I think I’ve found…

Read more »

A Rolls-Royce employee works on an engine
Investing Articles

In penny stock territory, is the Rolls-Royce share price set to soar?

The Rolls-Royce share price has sunk recently, falling into penny stock territory. But with flying hours recovering, is it too…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

Lloyds shares drop 20% in 4 months. Should I buy now?

Lloyds shares have lost a fifth of their value since peaking on 17 January this year. But after rebounding from…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

As the stock market recovery stalls, should I wait to buy?

Has the stock market recovery run out of steam? If so, what does that mean for our writer's portfolio? Here…

Read more »

Diagonal chain made of zeros and ones. Cryptocurrency and mining.
Investing Articles

At 55p, is the Argo Blockchain (LON:ARB) share price too cheap to miss?

With a low P/E ratio and strong financial results, could the Bitcoin miner be good value for money?

Read more »

macro shot of computer monitor with FTSE 100 stock market data in trading application
Investing Articles

Here are 2 recession-proof FTSE stocks!

In the face of current economic uncertainty and fears of a looming recession, this Fool identifies two recession-proof FTSE stocks.

Read more »

British Pennies on a Pound Note
Investing Articles

Here is 1 penny stock primed to benefit from the construction boom!

Jabran Khan delves deeper into a penny stock that he believes could benefit from the construction boom, and explains why…

Read more »