Brexit…
That’s the term the press uses to describe the decision British voters made in June 2016 to leave the European Union (EU).
And it’s setting up what could be your best-performing investment in 2020 – British stocks.
Here’s colleague Teeka Tiwari on the opportunity dead ahead…
I know what you’re probably thinking… “Teeka, have you lost your mind?! What do I care about some political event taking place on the other side of the world? I don’t invest in foreign stocks. Britain leaving the EU doesn’t affect me here in America. There is no possible way this will make sense for me!”
And you know what? Normally, I’d agree with you. But this investment opportunity is one that is simply too big for any rational person with an interest in building wealth for the future to ignore.
Today, I (Chris) will give you the lowdown on why Teeka is so excited about the opportunity in a stock market more than 3,000 miles away.
I’ll also show you a “one-click” way you can profit without directly having to buy a single British stock.
Simply put, Britain has an unloved stock market. That’s thanks to all the economic uncertainty the unresolved Brexit saga caused.
Unloved markets tend to be cheap. And although most amateur investors run away from stocks that are cheap and unloved, the pros know these are where to make the real money.
Take a look at the next chart. It’s of the price-to-earnings (P/E) ratio of the main British stock market index, the FTSE 100 Index. It tracks the top 100 British-listed stocks by market cap.
The P/E ratio tells you how many dollars investors are willing to pay for one dollar of earnings the companies in an index produce.
And as you can see, the P/E ratio for the FTSE 100 has plunged 63% since the Brexit vote.
Said another way, you can buy one dollar of earnings these top British stocks produce at a 63% discount from what was on offer the day of the Brexit referendum.
The execution of Britain’s departure from the EU hasn’t exactly been smooth. Successive governments tried – and failed – to ratify the Brexit referendum vote in Parliament.
This has left the British economy in limbo. The country has been neither fully in… nor fully out of the EU. So I wouldn’t blame you for not following all the convoluted details.
I’m Irish. That makes me a citizen of the EU. I have a vested interest in the outcome of Brexit. But I still get exhausted trying to keep up with all the stops and starts.
That’s about to change, though.
As we showed you yesterday, Brexiter-in-chief Boris Johnson won a landslide victory last week for his Conservative Party.
And he did it by running on the campaign slogan “Get Brexit done.”
That’s what will happen in 2020. After three years of uncertainty over Brexit, Johnson now has the mandate to get Brexit passed in Parliament… and finally take Britain out of the EU.
Boris Johnson didn’t just win last week’s election. He won the biggest majority for the Conservative Party since 1935.
This has given him a thumping mandate to take Britain out of the EU… and clear up three years of Brexit uncertainty.
There’s one thing stock market investors hate more anything else… and that’s uncertainty. Investors hate not knowing what’s going to happen with a looming event.
That’s why Teeka has been on the hunt for opportunities to profit from the Brexit news. As things go from uncertain to less uncertain… that’s usually a great time to buy in.
Teeka again…
This has the potential to make you serious money – no matter whether you’re an expert on Brexit or have been living under a rock and have never heard of it before.
That’s because it’s got nothing to do with knowing politics, but simply understanding the market’s reaction to politics – and how we can take advantage of it.
Teeka is right. This isn’t about understanding the intricacies of Brexit. Frankly, life is too short. It’s about understanding that Brexit has caused a lot of uncertainty for investors… and that much of that uncertainty is now going away.
So is Goldman Sachs. In a recent research note to clients, it listed British stocks as one of its top seven investment ideas for 2020.
The investment bank has identified that $150 billion in foreign funds will flow into Britain now that Brexit will go ahead. This, it says, will propel economic growth in Britain through the early 2020s.
That growth spurt will translate into a surge in beaten-down British stocks.
We’re already starting to see confidence return to British markets. Just this week, S&P Global Ratings and Fitch Ratings upped their assessment of the British government’s creditworthiness. Here’s Bloomberg with the report…
At S&P, the country’s outlook was shifted to stable from negative, with analysts citing the diminished risk of a no-deal Brexit. Meanwhile, Fitch took the U.K. off Rating Watch Negative — removing the immediate threat of a downgrade — but did maintain a negative outlook.
That’s why Teeka recommends you consider taking a small position in British stocks.
The iShares MSCI United Kingdom ETF (EWU) covers the top 85% of British companies by market value.
The fund trades on the New York Stock Exchange. But it gives you exposure to stocks trading primarily on the London Stock Exchange.
So it will give you broad exposure to the rebound in British stocks we see ahead.
Regards,
Chris Lowe
December 19, 2019
Dublin, Ireland
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