One stock I’d buy and one I’d avoid if there’s a no-deal Brexit

The potential costs of a no-deal Brexit are great, but not all UK stocks should be avoided.

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The Brexit October 31 deadline looms ever closer and investors aren’t too confident in UK stocks as the value of the pound decreases. The pound is currently at its lowest level since January 2017 and it’s hard to ignore how both a weak pound and no-deal Brexit could affect stocks. From real estate to retail, so many different markets are going to suffer at the hands of Brexit. It’s hard to know the extent of the damage that our EU exit could cause, but it’s enough to have investors worried.

It’s becoming increasingly possible that a disorderly no-deal exit could be the fate of the UK, although I wouldn’t want to take bets given what has happened in Parliament in recent days. But these uncertain times do call for certain stocks to be avoided at all costs, which I’ll discuss below. However, I do believe that some stocks are still worth investing in, no matter what the Brexit outcome.

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Don’t bank on it

Investing in banks is already risky business considering the current market. However, Barclays (LSE: BARC) is one that I’d really want to avoid. Being one of the most hated banking stocks in the UK, it clearly isn’t just me who is sceptical about the investment.

Before Brexit reached the stage it has, Barclays was struggling even with strong economic conditions. The main reason behind the uphill battle was low-interest rates. Total income dropped 1% in 2018 Q4. To make things worse, Barclays’ credit impairments hit £296m last year, this is the highest level that they’ve hit for years.

If a no-deal Brexit were to happen, I think that things would only get worse for the company. The fact that investors are already lacking in confidence suggests that it’s unlikely there’ll be much backing for Barclays after Brexit. I wouldn’t be tempted by the dividend yield of 5.1% as I think the share price will only keep plummeting.

Beating the Brexit blues

Unilever (LSE: ULVR) is one stock that I’d back even if there’s a no-deal Brexit. The company has a huge and very impressive portfolio of food, drink and homecare brands that are household names. Some of these brands include Dove, PG Tips, and TRESemmé. The high demand for these products seems unlikely to dwindle, no matter what the economic state of the country is.

For the second quarter of this year, Unilever’s sales rose 7.4%. While analysts are expecting earnings per share to grow by around 13% by the end of this year. Furthermore, analysts also predict that the dividend yield will increase by 9.4%. Not only should the company stand strong, but investors should also even get higher dividends! These promising figures give me confidence that the company has what it takes to continue its growth throughout Brexit.

The diverse range of products and resilience against the economic climate really does make Unilever my stock of choice in the face of a no-deal exit (and if that exit is delayed or cancelled too).  

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fional has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended Barclays. 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.

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