This week, the EU has warned Britain that we’re hurtling towards a terrifying no-deal Brexit. There are only six short weeks left until the country is set to leave the EU and with no deal currently in place, the odds seem increasingly likely.
What effect will this have? While no one really knows, one thing we do know is that this will have a huge impact on the stock market. While last week, the UK stock market was on the rise, this week, reality has hit.
I’m backing one stock that could be virtually untouched by Brexit and another I have faith in despite hesitant investors.
Ashtead (LSE: AHT) is a British stock I’d back to defend my portfolio against a hard EU exit. It’s an equipment rental company that’s demonstrated exponential growth in recent years. So much so that Ashtead’s share price has risen by 125% in the past five years. The share price rise 16% in the past three months alone. This is all despite fears of a market slowdown due to Brexit.
Ashtead saw a very impressive 17% rise in first-quarter revenue to £1.3bn. A lot of this was thanks to huge growth in the US. In fact, 90% of the company income is coming from the other side of the Atlantic. This is why I’m so confident in this stock, a no-deal Brexit will be practically irrelevant to this company as only 10% of its income comes from Britain.
City analysts predict an 18% rise in earnings-per-share this year and a further 11% increase next year. Dividend yields may be very modest, being only 1.7% at the time of writing. However, this is more than comfortably covered 4.7 times by earnings. The P/E has dropped to only 11.4 this year which leads me to believe the shares are reasonably priced. An investment to beat a no-deal Brexit? I think so.
Barratt Developments (LSE: BDEV) shares surged 6% higher last week as optimism surged that a no-deal Brexit could be avoided. Sadly, this optimism appears to have waned this week. However, I believe Barratt could still be a good investment other seem to agree as it’s still rising, despite looming Brexit fears.
The housebuilder has seen earnings per share rise around 30% per year over the past six years. The company currently has an attractive dividend yield of 4.5% and city analysts predict this will be around 7% in 2020. The dividend is also covered a comfortable 1.6 times, which leads me to believe that investors’ ROI will be safe. Despite Brexit negatively affecting the UK property market, Barratt continues to fight back, and is likely being boosted by the government’s Help to Buy scheme.
Earlier this month, the company posted a 9% increase in annual profit before tax to £909.8m, which seems to mean it’s bucking the Brexit trend. Having said this, Help to Buy is being scaled back in the coming years and it’s hard to predict how our EU departure will affect the property market, making this share a little risky. However, I remain confident that Barratt Developments will continue to grow, albeit slightly slower.
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fional has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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 2019