Stocks Least Affected By The Brexit Vote

Against the backdrop of Britain voting to leave the European Union, Global Equities Research’ Trip Chowdhry mentioned that political chaos was inevitable, but there were four companies that would be least affected by this.

Political Chaos In The Offing

UK Prime Minister David Cameron put the Brexit [Britain’s Exit] issue to a referendum, with the aim of silencing EU critics in his Conservative Party, but this seems to have backfired, analyst Trip Chowdhry mentioned. He added that Cameron’s government is likely to lose a vote of confidence in the House of Commons.

Chowdhry noted the economic impact of Britain’s exit from the EU:

  • End of unrestricted free flow of goods, services, materials and labor from the rest of Europe to Britain
  • Consequent rise in labor costs in Britain
  • Oversupply of certain skills and shortage of other skills
  • Rise in cost of goods and services
  • Britain will become noncompetitive in world markets
  • Britain’s economy will shrink
  • Decline in the overall value of businesses based in Britain due to higher labor and material costs

Companies Least Affected

The analyst mentioned stocks that would be least affected and the reasons as:

Red Hat Inc RHT

  • Long-term contracts in place
  • Fully matured subscription model
  • No production in Britain
  • Market share wins against legacy Solaris Operating System, and Microsoft Windows OS

salesforce.com, inc. CRM

  • Long-term contracts in place
  • Fully matured subscription model
  • No production in Britain

Apple Inc. AAPL

  • Sticky subscription
  • Low PE

Amazon.com, Inc. AMZN
Amazon's AWS would be least affected because of:

  • Sticky subscription
  • Strong Web Services offering - both breadth and depth
  • As IT Budgets shrink, customers will look for cheaper and more cost effective service

Posted In: Global Equities ResearchTrip ChowdhryAnalyst Color

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