The Brexit deadline is just weeks away, with no trade deal in sight. A last-minute deal is still a possibility, but the limited time is making some business leaders quite nervous.
The uncertainty of both Brexit and Covid-19 is being reflected in the stock market with prices rising and falling on the slightest bit of news. With all this in mind, there are two UK stocks I want to own before the Brexit deadline.
Brexit stock #1: A currency king
Alpha FX (LSE:AFX) provides currency risk management services as well as enterprise payment solutions for small to medium-sized businesses. Its team of experts buys specialised financial derivatives to protect its clients from fluctuations in currency prices.
You see, the previously mentioned volatility is not just limited to the stock market. The value of the pound has been quite erratic since the Brexit referendum. Even if the UK secures a trade deal with the European Union, the pound is still going to be affected.
Unlike most businesses, this currency price volatility is excellent news for Alpha. Large price movements provide more opportunities to profit as well as make their services more essential for new and existing clients with international operations.
However, this does also mean that during times of stability, the firm may struggle to retain its customers. But Alpha also develops and maintains a digital payment processing network designed for instant enterprise-scale international transactions.
Digital payments for small transactions — like your weekly shopping — have been almost perfected by companies like Visa. But processing large scale international transactions is quite tricky, with very few solutions available that can match the quality of Alpha’s network.
Brexit stock #2: The demand for housing continues to climb
There are plenty of industries operating solely within the UK that will not be directly affected by a no-deal Brexit. For example, housing.
The UK population is growing. Current estimates indicate that the total population will reach 70bn by 2030 and they are all going to need homes.
Persimmon (LSE:PSN) is the second-largest housebuilder and seller in the UK. The business model is straightforward: it builds property, sells it, and uses the proceeds to make more homes. Rinse and repeat.
However, Persimmon has a key advantage over its competitors that caught my eye. Its structure is almost entirely vertical. What that means is, the company controls almost every step of its operations.
It makes all the bricks, tiles, and timber it needs to build homes and thus is not dependent on outside suppliers. It retains its own team of builders and contractors, removing the need for hiring a third-party workforce. And lastly, it has its own sales team, removing the need to outsource to real-estate agents that charge enormous service fees.
This level of control grants the management team the capability to eliminate any inefficiencies within the business. An excellent sign for shareholders in my eyes.
The bottom line
While these stocks don’t appear directly related, they do have one thing in common. Both companies provide a service that, in my opinion, will remain essential for decades to come even in post-Brexit Britain. These are the sort of businesses I like to own.
The post 2 UK stocks I’d buy before Brexit appeared first on The Motley Fool UK.
Zaven Boyrazian owns shares in Alpha FX. The Motley Fool UK has recommended Alpha FX. 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.
Motley Fool UK 2020