London-based researchers at Berenberg, headquartered in Hamburg, set out “to identify those stocks that are either more resilient to Brexit uncertainties than the market appreciates, or are completely immune and offering compelling value.”
The Berenberg analysts found 12 firms that fit the bill:
An Airbus 380 during the Farnborough International Airshow, 13 July 2016. Photo: Airbus Group
The aerospace and defence company Airbus. “It is likely to benefit from euro weakness,” wrote the Berenberg researchers.
Ashtead, an equipment rental outfit, which “generates 92% of operating profit in the US, and now trades on a 25% discount to rental peers despite better growth/returns,” according to the report.
The ASML stand at “RoboCup 2013 in Eindhoven” on 27 June 2013. Photo: RoboCup2013 (CC BY 2.0)
The maker of chip-manufacturing equipment ASML, as “the UK is a small end-market for” the firm.
CRH, the construction supplies vendor. “Although there could be an impact on the UK business, the total exposure is only 11% of EBITDA and it largely avoids what we perceive to be the principal risk of falling prices in emerging markets for the cement majors.”
Diageo, the drinks company. “The market has already rewarded Diageo’s favourable FX exposure, but we think the next numbers should show an improvement in trading, allowing it to re-rate towards spirits peers.”
The funeral services firm Dignity. “Demand is driven by UK mortality rates, and is therefore not cyclical,” the Berenberg researchers wrote.
Fresenius Medical Care, which provide dialysis equipment and services. “A highly predictable business, driven by 6% global market volume growth, with 70% revenue exposure to the US.”
The specialty chemicals company Johnson Matthey, which “generates only 5% of sales in the UK, so will benefit from a substantial FX tailwind.”
A courtyard at the former Prudential Insurance headquarters, in London, taken on 17 September 2011. Photo: Rictor Norton & David Allen (CC BY 2.0)
Prudential, the UK-based financial services firm. “We think the recent noise around the solvency position at Prudential lacks credibility. The US dollar exposure will act as a tailwind to earnings.”
The software maker SAP. “We see the positive product replacement cycle outweighing any macro risk, which is not yet reflected in consensus,” the analysts commented.
Electric cars line up for an electric vehicle test drive event, that included power chargers made by Schneider Electric, in Toronto on 13 August 2012. Photo: Plug’n Drive Ontario (CC BY-SA 2.0)
Schneider Electric, the energy equipment enterprise that “trades at a double-digit discount to peers, despite a better margin profile due to pricing power and a well balanced footprint.”
The telecoms provider Sunrise Communications, which is “100% Swiss domestic; we think EBITDA can return to growth, making the 6% yield too compelling to ignore,” stated the Berenberg report.
According to its website, “With more about 1,300 employees and more than €40 billion in assets under management, Berenberg is one of the world’s leading private banks.”
The report, “Brexit: stocks with under-appreciated resilience”, was published on 1 July.
