Good Investments for Soft Brexit

[gryffron]

The likelihood of the following scenario has been, and can be, discussed endlessly elsewhere. For the purposes of my thread please don't question the assumption. Just run with the idea. I'm only interested in the investors perspective.

Assumption: There will be a very soft brexit. UK joins EEA. End of all uncertainty. Deal done.
Question: If I am a UK investor and betting on the above, where would I invest now?

My thoughts:
One can expect the end of uncertainty to be good for the stock market, so there ought to be some investments which will outperform cash. But soft brexit will certainly result in a substantial strengthening of the pound, which is immediately bad for foreign investments, and most large FTSE companies' foreign earnings. It isn't necessarily even good for UK exporters. For although their access to markets is now certain, their prices have just been hiked which will seriously hurt their competitiveness. Will the certainty be sufficient to override the loss of competitiveness? - Not sure.

So where should I put my money. I guess it needs to be mostly UK based importers? They have the most to gain from a strong UKP. Other than the UK retailers, I'm struggling.

Marks&Sparks. Morrisons, Kingfisher, Next
Sainsburys? Currently in the middle of a takeover battle
Tesco? Slightly more international?

Any other ideas?

Gryff

[SalvorHardin]

My money is on Central London Commercial property. I own shares in three of the London commercial property specialists; Derwent London, Great Portland Estates and Shaftesbury. There's been a lot of doom and gloom in this part of the market ever since the Brexit vote, causing these companies' share prices to trade at a discount to their NAV. Previously they tended to trade at a premium (Shafestbury especially), though part of the reason for these historic premiums was because accounting rules are not very good at valuing developments.

The vast majority of all three companies' properties are situated within the area bounded by the Circle Line (Zone 1, most of the Monopoly Board), so they will be big beneficiaries from the Crossrail project once it starts to operate.

I reckon that the pound will not recover as strongly as some have suggested. The US dollar has been strong against most currencies recently whilst the oft-quoted $1.50 per £1 only appeared for a short time in the somewhat less liquid Far Eastern markets shortly after the polls closed. I reckon that $1.40 is the upper limit.

[TUK020]

Major European stocks may also benefit, and the Euro will probably strengthen against a basket of currencies, albeit by less than Sterling

[Gengulphus]

I'd suggest looking at those sectors that showed particularly large falls in the wake of the June 2016 Brexit referendum result, on the basis that a very soft Brexit would be seen as largely reversing it.

As I remember it, the thing that struck me at the time was that companies with substantial amounts invested in UK property did notably badly then, such as some REITs, pub companies and housebuilders.

Gengulphus

[Hariseldon58]

I think a softish deal is very likely, I presume the market has already predicted that outcome and so only a hard Brexit will move the pound / markets significantly. IE I see no major predictable move is likely to be profitable but the uncertainty might well provide some interesting buying opportunities.

The pound dollar exchange rate is the one that will effect the short term value of my portfolio most significantly.

I have a lot of US Treasuries at present on the basis that I keep trimming my equity portfolio when it breaches its April 2018 value, to provide some funding for opportunities and this has raised £170k so far. ( dollar bonds mainly to reflect the selling of dollar based equities)

I think on a global perspective, Brexit is just a sideshow and finding purely U.K. investments is not so easy.

Trying to predict currency movements is beyond my pay grade and so I am a little nervous of a multi year momentum market, that is becoming pretty fullly valued having a hiccup...

So I’m back looking at investments I had largely withdrawn from over the last 6 years or so, investment trusts, decent discount , distinctive or value based management and if that provides a reasonable yield, then not to be sneezed at.

The Brexit uncertainty must result in the reduced appeal of U.K. Equities to foreign buyers, so that there may be a relief rally , add a stronger pound and we could well end up with markets that are volatile but end relatively unchanged.

If I read this in a years time I expect it will wrong !

[formoverfunction]

I'd suggest looking at those sectors that showed particularly large falls in the wake of the June 2016 Brexit referendum result, on the basis that a very soft Brexit would be seen as largely reversing it.

As I remember it, the thing that struck me at the time was that companies with substantial amounts invested in UK property did notably badly then, such as some REITs, pub companies and housebuilders.

Gengulphus

I have for some time been buying the higher yielding REITs as a hedge against a softer brexit.

I'm hoping they will will provide a double digit total return if that's the outcome.

I certainly agree that property, pubs and housebuilders are sensible places to look. Although, I feel more confortable with property and housebuilders overall.

[richfool]

I topped up a property healthcare company (PHP), mostly for a defensive point of view and the income.

I am pondering whether holding Mercantile IT (UK mid caps) is a good idea or not. I was anticipating that if Brexit goes better than expected that mid caps and domestically focussed stocks might jump up.

[melonfool]

We had our annual pension review at work today and they said the outlook is that the next quarter will see a big slow down in the FTSE returns. But that commercial property has been doing well and that is expected to continue.

Obviously, these are 'The Wise', but make of it what you will.

Mel

[simoan]

Obviously, these are 'The Wise', but make of it what you will.
Mel

What I make of it, is that they're just guessing like everybody else, except they get paid to guess . Obviously, as part of their job they have to give an opinion when asked but in reality they know they don't really have any more idea than anyone else. I wish they'd just be more honest and admit it but then they'd lose their job...

All the best, Si

[melonfool]

Obviously, these are 'The Wise', but make of it what you will.
Mel

What I make of it, is that they're just guessing like everybody else, except they get paid to guess . Obviously, as part of their job they have to give an opinion when asked but in reality they know they don't really have any more idea than anyone else. I wish they'd just be more honest and admit it but then they'd lose their job...

All the best, Si

Yes, I am fully aware of how pensions advisors work. And that no-one really knows the future. I just thought that it was interesting to see an opinion on the matter. You know, like when people post links to various commentary. I was obviously wrong and will not bother again.

Mel

[simoan]

Obviously, these are 'The Wise', but make of it what you will.
Mel

What I make of it, is that they're just guessing like everybody else, except they get paid to guess . Obviously, as part of their job they have to give an opinion when asked but in reality they know they don't really have any more idea than anyone else. I wish they'd just be more honest and admit it but then they'd lose their job...

All the best, Si

Yes, I am fully aware of how pensions advisors work. And that no-one really knows the future. I just thought that it was interesting to see an opinion on the matter. You know, like when people post links to various commentary. I was obviously wrong and will not bother again.

Mel

Hi Mel,

I don't know why you've taken my post the wrong way? There was a smiley indicating good humour and I was only commenting on the pension advisor rather than anything you wrote in your post. perhaps it should be me that stops posting...

All the best, Si

[melonfool]

Because you were explaining to me what a pension advisor does when it is my job to commission the pension advisor at work and I know what their job is?

Also that the fact I said 'they are The Wise.....'etc, shows that I know full well the limitations.

Mel

[simoan]

Because you were explaining to me what a pension advisor does when it is my job to commission the pension advisor at work and I know what their job is?

Also that the fact I said 'they are The Wise.....'etc, shows that I know full well the limitations.

Mel

Well, to be fair, how am I meant to know what your job is? I don't understand why you'd get so upset based on my innocuous reply.

I'll sling my hook and stop posting on Lemonfool for a few months.
All the best, Si

[melonfool]

Because you were explaining to me what a pension advisor does when it is my job to commission the pension advisor at work and I know what their job is?

Also that the fact I said 'they are The Wise.....'etc, shows that I know full well the limitations.

Mel

Well, to be fair, how am I meant to know what your job is? I don't understand why you'd get so upset based on my innocuous reply.

I'll sling my hook and stop posting on Lemonfool for a few months.
All the best, Si

Why would I be doing the company pension review if it wasn't my job to do the company pension review?

Mel

[richfool]

Mel, your response did seem very sensitive (as in an over-reaction) to me. I didn't read any sarcasm or "teaching one's grandmother how to suck eggs", (type of thing) in Simoan's post.

When I read your comments about having.... "our pension review" and "they said", .... I took it that a pension adviser was reviewing your pension.

I was/am keen to hear all inputs on the subject. Please don't take offense, either of you.