Brexit is throwing the world's markets into confusion: do we buy, hold or sell? Scott Nursten explains just what the investor's reaction should be and why.
Brexit, or "British Exit", was essentially a planned referendum put forward by David Cameron to the public vote on whether Britain should leave the European Union, or not. The vote came close, but in the end the 51.9% majority voted to leave the EU. This has caused panic to erupt on world stock markets, particularly those closely tied to Britain (which is most).
We decided to interview our CEO, Scott Nursten, on what the implications of Brexit are on UK stocks and how investors should be reacting to it. Scott is a CEO/MD with broad business experience that spans an impressive 18 years. During this time, he’s worked from front-line support, through middle management and executive levels. Now, with a passion for technology and a strong background in financial analysis, he’s currently involved in 4 rapidly growing businesses, including STRIDE.
The Implications of Brexit on UK Investments
1. Should we panic or get excited? A bit of both? Neither?
Scott: This isn't easy to answer. As an investor, we've seen the GBP tumble along with shares in the UK. Take a retailer like Next Plc (LON:NXT) and you'll see that the shares have tumbled 12.45% as of today and were 21.64% down on Tuesday. Couple that with the pound falling roughly 10% over the same time and you have a fabulous opportunity for value investors. On the flip side, you have the political and economic uncertainty that this brings and that creates FUD - fear, uncertainty and doubt. Personally, I think this is a blatant over reaction and that it presents an exciting opportunity. Whatever your view, this is the new reality and we must all understand that there are going to be drastic changes in the UK and across Europe.
2. Does BREXIT offer an opportunity to enter UK markets on the cheap?
Scott: Definitely, everything from pizza, housing and retail is trading cheap. This response assumes that Brits will stop eating food, buying homes and wearing clothes. That just isn't feasible. There will be changes to certain markets as a result of this, but - as above - I think it's an over reaction. When coupled with the pound devaluation, it presents a great opportunity.
3. Which stocks have you sold and bought in the past week? Why?
Scott: I have sold a few stragglers in markets where the crossover rate to the GBP has served me well. I sold a couple of smaller holdings in Japan and the USA to buy into shares in the UK. I particularly like Persimmon (PSN.L), Howdens (HWDN) and a few others - all targets on the STRIDE list in the UK basically.
4. What will the general impact be on US and Asia markets?
Scott: We've seen the worst of it already I think. It's just reality now and everyone will move on. I think the US presidential election may create more volatile markets than Brexit did. Ultimately, volatile markets are a value investors friend - so watch out for opportunities created by the volatility and pick up great companies on the cheap.
5. If you’re buying UK stocks, you must be sure that they'll soon rise?
Scott: Not at all - 'soon' is not a word that value investors use. Eventually is a better word. My investment time horizon is typically 5 to 10 years and, ultimately, I'm looking to hold companies forever.
Scott's general consensus on Brexit is that investors should find "great companies and buy them cheap. If anyone thinks that - in the long term - there won't be a housing market on a small island that is one of the financial power houses of the world... then they're delusional".
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