Britain stands on the precipice of a no-deal Brexit and we, as investors, need to be aware of the possible consequences. Just ask shareholders of firms as varied as Lloyds, Dixons Carphone, Thomas Cook and Royal Mail, companies who have all seen their share prices plummet in recent times.
The economic pressures leading up to Brexit, and the uncertainty of what the UK’s long-term relationship with the European Union will look like, have hammered trading at firms with high gearing to the domestic economy, like these over the last 12 months. But things could be about to get even worse.
Most recent OECD forecasts suggest Britain would immediately be plunged into a recession in the event of a no-deal Brexit. It also forecasts a disorderly European Union withdrawal would lop 3% off UK GDP over the next three years.
Make some money
Of course, it pays to be concerned in this environment. I’m sure almost all of our readers hold stocks that generate some proportion of earnings from these shores. But with the right tactics, it’s actually possible to make money in the event of us all falling off the Brexit cliff-edge.
The electricity network operator is still rising as I type — it’s gained 7% in value in just over a fortnight and, at 870p per share, it’s a whisker away from being at its most expensive since November 2017. Utilities are a traditional rush-to-safety play and National Grid is arguably the best of the bunch. That’s because its monopoly on running the UK’s power grid insulates it from the sort of crushing competitive pressures as many of its peers, such as Centrica.
That’s not to say the FTSE 100 firm isn’t without its degree of risk, however, as regulators closely scrutinise the profitability of energy and water suppliers. I would say, though, these risks are more than baked into National Grid’s forward P/E ratio of 0.2 times. In fact, this bargain-basement reading and a corresponding dividend yield of 5.5%, makes the blue-chip a brilliant buy, in my opinion.
Another income star
I would also back Begbies Traynor Group (LSE: BEG) to witness some significant share price strength following a no-deal Brexit.
Corporate insolvencies are booming in the UK due to the current political and economic uncertainty. These rose 10% in the year to April, Begbies Traynor reported back in July, and this propelled revenues 15% higher to £60.1m. In a statement last week, the corporate insolvency specialist confirmed it has continued “to perform well” too. And you can only expect trade to continue improving should the UK encounter a severe economic shock.
The AIM-quoted firm fell last week amid media reports of the company occupying properties owned by chairman Ric Traynor. A company statement afterwards that it no longer operates out of such properties has assuaged investor nerves and it’s back on the rise. And I reckon its inflation-beating 3.7% forward dividend yield and low corresponding P/E multiple of 13.6 times should help to keep buyers piling in.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group. 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.