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Which stocks benefit from a weak pound?

Not every UK stock fell victim to Friday’s Brexit bloodbath. Some kept their heads to end the day higher, which suggests they are nicely placed to survive the forthcoming economic and political uncertainty. 

Safe havens

The biggest winners from Friday’s meltdown came as no surprise. Precious metal miners Randgold Resources (up 14%) and Fresnillo (up 12%) were inevitable beneficiaries of the global chaos triggered by Brexit, as investors rushed for the comfort of a familiar safe haven.

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Friday’s next best performer was microchip maker ARM Holdings (LSE: ARM), which saw its share price rise a panic-defying 6.48% on Friday. This partially reversed recent losses that followed reports of the iPhone’ first ever quarterly decline in sales. With the pound plunging, ARM’s royalty revenues could bounce more than 10% once they are converted back into sterling.

The downside is that at 44 times earnings, ARM has to keep growing rapidly to justify its pricey valuation. But at least Brexit offers as much of an opportunity as a threat.

Smoke across the water

Contract caterer Compass Group was another Brexit winner, up more than 4% on Friday, as its rising global earnings from markets in the US, Latin America and Asia will convert nicely into weaker sterling and counteract the recent slowdown in its emerging markets territories.

Pharmaceutical giants GlaxoSmithKline and AstraZeneca also rose around 4% on Friday and continued rising on Monday, as investors looked for safe ports in the UK’s storms, especially ones offering well-diversified global earnings.

And can nothing stop British American Tobacco (LSE: BATS)? It’s one of the best performing FTSE 100 stocks of the past 10 years, with its share price chart curling upwards as inexorably as smoke from a Lucky Strike. It rose 3.17% on Friday, and 1.61% again on Monday. Smoking kills, but it does offer your portfolio life-enhancing qualities.

British American Tobacco has been fighting currency headwinds in recent years, as 70% of its sales are made in emerging markets, where currencies have fallen sharply against the dollar. So at least Brexit means it can now look forward to a currency tailwind for a change. The price of this success is a high valuation of 21.33 times earnings and so-so yield of 3.46%, but history suggests that’s a price worth paying.

Raise a glass

Global spirits giant Diageo (LSE: DGE) has suffered a three-year hangover following the departure of former chief executive Paul Walsh, but Brexit has handed it a much-needed hair of the dog, again, courtesy of the plunging pound. Thirsty investors immediately grabbed the opportunity, with the stock up 3% on Friday and another 1.92% on Monday.

Diageo has also been hit by the emerging market slowdown and falling local currencies. The disappointing 2% drop in organic sales in North America in the second half of last year will now be offset by a more than 10% surge in the value of its dollar earnings. Earnings per share have fallen in the last three years but that looks set to reverse, with a forecast rise of 8% in the year to 30 June 2017. Even at 21.6 times earnings, Diageo looks a tempting buy for the first time in several years, so even the most ardent pro-Remain investors can raise a glass to Brexit.

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Harvey Jones has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended ARM Holdings, AstraZeneca, and Diageo. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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