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5 Stocks to Profit as U.K. Economy Hits Decade Low in Q3

Zacks Equity Research

As we look at the key indicators to fathom the effects of Brexit on the global economy, a recent report has brought the cynosure back to the perils of the United Kingdom’s exit from the European Union (“EU”). Per the data by the Office for National Statistics, the U.K. economy grew at a sluggish rate in nearly a decade in third-quarter 2019 as uncertainty over Brexit continued to weigh on business, leading to job losses amid political turmoil. The third quarter witnessed growth of 1% — the worst annual performance since early 2010 in the wake of the Great Recession.  This has taken a toll on investment and productivity, leading some economists to call for more stimulus from the Bank of England.

The number of U.K. companies witnessing a slowdown in the September quarter jumped 35% — the highest since 2013 — per a survey by the Confederation of British Industry. Both the construction and manufacturing sectors have entered a prolonged recession. More than 50% of U.K. goods are exported to the EU’s 27 other members countries (excluding gold), where manufacturers have consistently argued that higher barriers in the form of tariffs or customs checks would hit profits significantly. However, the U.K. economy managed to dodge a recession, with quarterly growth rebounding to 0.3% sequentially after a negative reading in the second quarter. The manufacturing sector was almost flat, while the trade deficit narrowed on growing exports of goods and services.

Britain remains vulnerable to economic shocks in the backdrop of slower global growth amid the U.S.-China trade war as Brexit uncertainty drags down export activity in the United Kingdom. However, experts expect the U.K. economy to grow at a decent pace in the forthcoming quarters, driven by consumer spending and services sector although manufacturing industries are likely to continue struggling as these are most exposed to the negative aspects of Brexit.

Amid such a challenging macroeconomic environment, investors could benefit by investing in some high fliers that have withstood the Brexit pressure and boast healthy fundamentals to continue their winning run. Here are five stocks with favorable Zacks Rank and strong momentum characteristics that are likely to gain further in the future.

Lloyds Banking Group plc LYG: Lloyds Banking is a major British financial institution. Its businesses provide a range of banking and financial services in the United Kingdom and a limited number of locations overseas. The U.K. retail bank currently carries a Zacks Rank #2 (Buy) with VGM Score of B. The stock has gained 17.5% compared with the industry’s rise of 5.6% year to date. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.



 

The Unilever Group UL: Unilever is a British-Dutch transnational consumer goods company, engaged in manufacturing of branded and packaged consumer goods, including food, detergents and personal care products. The company currently carries a Zacks Rank #3 (Hold) with long-term growth expectations of 8.6% and VGM Score of A. The stock has gained 13.2% compared with the industry’s rise of 19.7% year to date.


BP p.l.c. BP: BP is a British multinational oil and gas company and invests considerably in hydrocarbon projects around the globe and in alternative energy sources as well. The company currently carries a Zacks Rank #3, and has long-term growth expectations of 9.7% with VGM Score of A. The stock has gained 7.9% compared with the industry’s rise of 5.2% in the last three months.



 

RELX PLC RELX: RELX is a corporate group engaged in providing information solutions. Its products and services comprise intellectual property content delivered through various media, including online, journals and books. The company currently carries a Zacks Rank #3 with long-term growth expectations of 8.4% and VGM Score of A. The stock has gained 16.6% compared with industry’s growth of 7.9% year to date.



 

Vodafone Group Plc VOD: Vodafone is a British multinational telecommunications conglomerate, providing telecommunications and IT services to corporate clients in approximately 150 countries. The network operator behemoth currently carries a Zacks Rank #3 and has long-term growth expectations of 14.3% with VGM Score of A. The stock has gained 18.7% compared with industry’s rise of 5.9% in the last three months.




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RELX PLC (RELX) : Free Stock Analysis Report
 
Lloyds Banking Group PLC (LYG) : Free Stock Analysis Report
 
Unilever PLC (UL) : Free Stock Analysis Report
 
BP p.l.c. (BP) : Free Stock Analysis Report
 
Vodafone Group PLC (VOD) : Free Stock Analysis Report
 
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