Diversification, local advantage, regulatory considerations… There are many reasons UK-based investors might prefer buying British shares over their US counterparts.
Coca-Cola Hellenic Bottling Company
What it does: Coca-Cola HBC manufactured and sold 2.8bn cases of some of the world’s most popular soft drinks in 2023.
By Royston Wild. Troubles in the US economy can create significant fallout for other parts of the globe. However, Coca-Cola HBC’s (LSE:CCH) lack of exposure to North America could make it more resilient than many other UK shares.
In fact, the FTSE 100 firm’s wide geographic wingspan means it’s not overly dependent on strong conditions in one or two territories to grow earnings. It sells its soft drinks across large swathes of Central and Eastern Europe, along with parts of Africa and Asia.
Coca-Cola HBC’s territorial footprint has other advantages. It has significant exposure to fast-growing markets, and today makes almost two-thirds of group revenues from emerging and developing regions. This gives it scope to exploit rapid wealth and population growth outside mature markets.
Competition remains a significant threat to the company’s profits. But thanks to beloved labels like Coke, Fanta and Sprite, it still has a great chance to grow earnings even during troubled economic times, in the US and elsewhere.
Royston Wild owns shares in Coca-Cola HBC.
Greggs
What it does: Operates a chain of high street bakeries selling sausage rolls, pasties, and sandwiches.
By Mark David Hartley. Despite an influx of American fast food chains flooding the UK recently, Greggs (LSE: GRG) remains a firm favourite among hungry Brits. The British baker opened its first store in Tyneside in 1939, a year before McDonald’s even existed. Now it boasts over 2,450 stores nationwide. The lingering effects of lockdowns hit the stock hard in 2022, wiping 30% off the price. However, it has since recovered most of the losses and is on track to hit a new all-time high this year.
But growth comes at a cost. With the price now 24 times earnings, it’s almost double the UK market average. Based on future cash flow estimates, they’re overvalued by 43%. It’s a volatile stock, with the price correcting between 30% and 50% several times in the past decade. Yet each time, it’s recovered to a higher price so investors may consider another correction a good buying opportunity.
Mark David Hartley owns shares in Greggs
J D Wetherspoon
What it does: J D Wetherspoon owns and operates a chain of 805 pubs across the UK. It’s brand is based on low prices.
By Stephen Wright. The most important thing with investing is finding a business model that is going to work for the long term. And J D Wetherspoon (LSE:JDW) fits the bill in my view.
The UK pub industry is tough, but the company differentiates itself by having the lowest prices. And I don’t think that’s going to become unpopular any time soon.
Making this work requires lower costs than the competition. And Wetherspoon manages to achieve this by owning the majority of its estate outright and buying in huge volumes.
Despite this, inflation is still the biggest risk with the business. Whether it’s utilities, products, or wages, higher costs make it hard to maintain profitability while undercutting the competition on price.
The firms is about as British as they come. And I think its current plan to focus on operating fewer – but bigger – pubs means the future looks bright for shareholders.
Stephen Wright owns shares in J D Wetherspoon.
Persimmon
What it does: Persimmon generates all of its revenue in the UK from the construction and sale of houses and flats.
By James Beard. Persimmon (LSE:PSN) looks set to benefit from the government’s emphasis on reforms to the planning system and a possible recovery in the housing market.
In 2024, the housebuilder’s expected to sell 10,500 properties. This is at the top end of its current guidance but nearly 29% below its 2019-2022 average of 14,712 completions.
Its average selling price is significantly below that of its closest rivals. This means it should be the first to benefit from an increase in demand for new properties.
However, a recovery isn’t guaranteed and previous efforts to build more homes in the UK have failed.
But Persimmon is debt-free. And it’s paid 895p a share in dividends over the past five years which, in my view, more than compensates for the risks associated with investing in the notoriously cyclical housebuilding sector.
Also, political and economic uncertainty in the US shouldn’t impact its share price too much.
James Beard owns shares in Persimmon.
