Skip to main content
  • Register
  • Help
  • Contact us
  • Log out of your HL account

3 shares for those bored of Brexit

Shares with strong fundamentals.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

It’s easy to get caught up in the ‘ifs, buts and maybes’ of the Brexit debate. But with claim and counter-claim being batted back and forth between the two sides, it can be difficult to know who to believe.

The first two articles in this special feature set about exploring the investment case for if Brexit bumps or boosts Britain. In the final part of our report, we put the crystal ball aside and focus on fundamentals.

Surely Brexit is important?

Don’t get me wrong, Brexit matters.

The point is that predicting the path of politics can be difficult, never mind correctly plotting the market reaction. Few anticipated the referendum result, but even fewer foresaw the steady upward march of the UK stock market in the months and years that followed.

If you’re unsure about what Brexit might bring, can you justify diverting your focus away from fundamentals?

Please remember that all investments fall as well as rise in value so you could get back less than you put in. All yield figures are variable, not guaranteed nor a reliable indicator of future income.

RELX

We’re long-term fans of Anglo-Dutch publisher RELX.

The group includes a world-leading events business, which hosts over 130,000 exhibitions for over 7m people every year. But the biggest contributor to profit is its production of academic journals, and databases like ScienceDirect and Scopus.

About 1 in 6 of the world’s scientific research papers are published by RELX. Millions of monthly users at thousands of institutions across the world pay regular subscriptions to access the vast banks of work.

The fact that free content is gaining ground online might ring a couple of alarm bells, but we aren’t too concerned. Free journals typically lack the quality of RELX’s peer-reviewed offerings, and for much of the academic community, unreliable research is worse than no research at all.

Having quality content means customers come back year after year. Such reliable revenues have helped build an attractive dividend record.

RELX has either held or increased the payout every year this century, and analysts expect this record to rumble on for a few years yet, although there are of course no guarantees. Market consensus is that an investment made today offers a prospective yield of 2.4% this year.

The shares trade on 19.9 times expected earnings. That’s above the range they’ve typically traded at in recent years.

RELX share prices, charts & research

A.G. Barr

A.G. Barr's brands range from Rubicon to Tizer. But the luminous orange IRN-BRU is by far the most important. This irreverent brand has been on sale since 1901. The challenges the group has overcome in those 117 years make Brexit look like a walk in the park.

Over that time, a combination of unique flavours and bold marketing has helped IRN-BRU sales consistently grow. That’s left us wondering what, if anything, could quench consumers’ thirst?

The government’s sugar tax is a potential headwind, especially as Barr took the brave step of rejigging the recipe to reduce the sugar content and avoid the punitive tax band.

The new lower sugar recipe was launched in January, and the initial reception to the reformulated recipe, as well as the zero sugar alternative, has been positive.

But A. G. Barr's taking no chances.

The group is increasing its spend on marketing and innovation. That will likely limit profit growth this year, but we think it's the right decision long term. A long-term view probably comes from the fact the Barr family remain heavily involved in the business.

We think the desire to pass the business onto the next generation means companies with a significant family stake are more likely to take decisions for the long term. Collectively, the Barr family control around 20% of the company, while two of the three individuals who know the top secret IRN-BRU recipe bear the Barr name.

The result is a debt-free balance sheet and a track record of dividend growth that stretches back to the late 90s. The shares offer a prospective yield of 2.4%. Of course while we think the prospects are attractive, investors should remember there are no guarantees where dividends are concerned and past performance is not a guide to the future.

A.G. Barr share prices, charts & research

ASOS

Shoppers in the UK and across the world are increasingly shunning the high street in favour of shopping online. As the UK’s largest online only clothing retailer, ASOS has proven adept at capitalising on this structural shift, and we think it can continue recent successes.

There’s a few reasons for that.

First, we like the group’s use of social media to bring a more personal touch to its marketing. A small group of stylish twenty-somethings make sure different looks are put in front of the right audience, and with 25m followers, there’s plenty of opportunity for likes and shares to translate into pounds and pence.

The fact shoppers can peruse a wide selection of third party brands ensures it isn’t dependent on its designers. That limits brand risk.

Looking ahead, there’s plenty of room for growth. In our view, this justifies the decision to reinvest back into the business rather than pay a dividend, despite the net cash position on the balance sheet.

Extra investment will likely hold back margins, but with sales expected to rise by over 20% a year for the foreseeable, profits should still motor but of course it is not guaranteed.

The shares trade on a premium 52 times forecast earnings. While it might seem a shame to play Scrooge, if results don’t live up to those great expectations, the shares could fall on hard times. Botching expansion plans is probably the biggest risk.

Still, we’re upbeat on the group’s prospects. After all, there are worse problems to have than how well you can manage the pace of expansion.

ASOS share prices, charts & research

Our research is not personal advice. If you are unsure of the suitability of an investment for your circumstances, please seek advice.

Author George Salmon, Equity Analyst, owns shares in A.G. Barr plc.

Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Thomson Reuters. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.

Editor’s choice: our weekly email

Sign up to receive the week’s top investment stories from Hargreaves Lansdown

Please correct the following errors before you continue:

    Existing client? Please log in to your account to automatically fill in the details below.

    Loading

    Your postcode ends:

    Not your postcode? Enter your full address.

    Loading

    Hargreaves Lansdown PLC group companies will usually send you further information by post and/or email about our products and services. If you would prefer not to receive this, please do let us know. We will not sell or trade your personal data.

    Important notes

    This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

    Daily market update emails

    • FTSE 100 riser and faller updates
    • Breaking market news, plus the latest share research, tips and broker comments
    Register

    Related articles

    Category: Shares

    Stock market dividends at record highs

    UK dividends are at a record high and growing despite recent wobbles.

    Nicholas Hyett, Equity Analyst

    14 Oct 2019 2 min read

    Category: Shares

    Next week on the stock market

    What to expect from a selection of the UK and international companies reporting next week.

    Nicholas Hyett, Equity Analyst

    11 Oct 2019 3 min read

    Category: Markets

    Brexit optimism boosts sterling and domestic stocks

    A look at the dramatic market moves following Boris Johnson’s talks with the Irish PM.

    Nicholas Hyett & Ryan Kenny

    11 Oct 2019 3 min read

    Category: Shares

    Three companies with ‘good’ business sense

    Nick Hyett highlights three businesses with an ethical and sustainable stance – plus the potential to deliver for investors.

    Nicholas Hyett, Equity Analyst

    09 Oct 2019 6 min read