The Brexit debacle rumbles on and continues to dominate the front pages. With the outlook so uncertain, it’s just one extra thing to think about when investing. While we can’t make our investments completely Brexit-proof, we can reduce the risk in a meaningful way, and I think these two shares are a great place to start.
Diageo (LSE: DGE) is a global leader in the alcoholic drinks market, with an enviable collection of well-known brands, including the likes of Johnnie Walker, Gordon’s Gin, Smirnoff, Baileys, Guinness, and many more. The company sells into more than 180 countries, with a focus on the premium segment of the market.
The UK makes up less than 10% of Diageo’s sales. In fact, the company sells almost twice as much in India, as it does in the UK. Its geographic spread of sales represents about as good of a hedge against Brexit, as I’ve seen.
The strength of Diageo’s individual brands also provides an added layer of protection. Well known brands attract brand loyalty, with consumers less likely to turn away from them in times of economic distress.
With nearly 40% of sales occurring in Africa, Latin America, the Caribbean and Asia Pacific, the company looks well placed to take advantage of future economic and demographic trends. Diageo estimates the total annual retail sales of alcoholic drinks to be over £700bn a year, giving it plenty of scope to improve market share and sales in the future.
Financial performance is positive too, with consistent revenue and profit growth over the last four years, while a net profit margin of 17% is highly commendable.
With a price-to-earnings (P/E) ratio of around 22, these shares are certainly not cheap. But that reflects the fact that this is a top quality and highly-sought-after company, whose financial performance should not be unduly affected by Brexit.
Robert Walters (LSE: RWA) is another name that isn’t over-exposed to the domestic UK economy. The international recruitment company generates 74% of its net fee income from outside of the UK, with nearly 40% coming from Asia Pacific.
It has a presence in at least 30 different countries – a figure continuing to grow. In the first half of this year, net fee income in Asia Pacific was up 10% from the same period a year earlier, while the German business saw both net fee income and operating profit grow by more than 40%. For the company as whole, net fee income and operating profit both rose by 9%.
It’s not just geographical diversification that makes Robert Walters attractive. The company could actually benefit from Brexit, specifically from the movement of workers out of the UK, in the financial services industry in particular. In fact, it is now the leading recruiter for Brexit-related roles in Frankfurt.
At a P/E of just 11, the shares look pretty good value to me. Especially considering that revenues, profits and net assets have all virtually doubled organically since just 2015.
Thomas has no position in any of the shares mentioned. The Motley Fool UK has recommended Diageo. 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.