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To Bet Against Brexit, Buy These 3 British Banking Stocks
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Investors are less anxious about Britain leaving the EU than they were a week ago. This is because of the latest polls which show that there has been a significant momentum shift towards favoring a vote to remain in the EU. Polls are giving mixed results right now, but for the most part, it is a very close contest between leaving and remaining.
While polls are pretty much neck and neck, gamblers seem to believe that there is a very likely chance that Britain votes to stay in the EU. Betting odds currently give the “remain” side a 77% chance of winning, according to betting exchange firm Betfair. A spokeswoman for Betfair has said that there is about 43 million pounds ($63.21 million) being wagered on the EU referendum vote.
Gambling tends to come with the risk of losing everything, and that is not a very prudent way to play the odds, especially when polls are so close right now. A better way to play the positive momentum shift for the remain side is by buying up stocks which have seen their share prices take a beating because of speculation regarding the possibility of a Brexit. Such stocks include banks in the UK. These institutions have already been affected by negative sentiment stemming from Brexit fears.
British banks stand to lose a lot from a vote to leave the EU. Many believe that a Brexit will trigger a massive asset sell-off, which could really hurt the lucrative investment banking branches of banks. Bernstein analysts believe that a Brexit would result in significant depreciation for the pound as well as higher unemployment and lower house prices in the UK. All of these factors are expected to make loans funded by banks riskier because of the higher chances for clients to default on their debt obligations.
While a Brexit sounds scary, momentum has definitely favored the “leavers” over the last week. Many expect to see this momentum propel the remain side forward going into the vote, which is to take place on the June 23.
If you are feeling lucky, British banks may be the way to go right now. That is because even if you are wrong about a Brexit, you will still own shares which are trading at a significant discount relative to the stock price a year ago. Some of the downside to UK banks has already been realized on the share price front, and at the same time, there is a lot of upside with these stocks if a vote to remain in the EU prevails.
Lloyds Banking Group is a UK-based financial services company, whose businesses provide a range of banking and financial services. The company’s segments include UK Retail Banking, Insurance and Investments, and Wholesale and International Banking. Lloyds is a Zacks Rank #2 (Buy), and the bank trades at a forward PE of 9.69. It’s worth noting that the industry’s average forward PE is 10.7. LYG has a market cap of $73.51 billion, and it doles out a sizable 3.22% dividend.
The Royal Bank of Scotland Group plc-
The Royal Bank of Scotland provides financial products and services to customers throughout the UK and beyond. RBS stock is a Zacks Rank #3 (Hold), and it has a market cap of $40.34 billion. The Royal Bank of Scotland looks like a bargain across some fundamental valuation metrics. In particular, the company is trading at a price-to-book of just 0.46. When a company’s price-to-book is under one, it may be undervalued.
Barclays engages in several different businesses within the financial sector. The company’s businesses engage in commercial banking, investment banking, and providing insurance and other financial services. A majority of Barclays branches are located in the UK, but the bank also has over 1000 branches abroad. BCS stock is a Zacks Rank #2 (Buy), and it also gets a grade of “B” for value in our Style Scores. The company has a market cap of $43.35 billion, and it doles out a generous 7.43% dividend to shareholders.
Bottom Line
If you are betting against a Brexit, you can either risk losing all of your money wagered, or go with executing a method that comes with significantly less downside. If you buy these stocks and you are wrong about a Brexit, you still own shares in those companies. If you are right about Britain choosing to remain in the EU and you own these shares, the upside could lead to a massive surge for the bottom line of your investment portfolio.
The Zacks Rank is a truly marvelous trading tool. Our ranking system has beaten the S&P 500, yielding an average return of 25% per year for the last 29 years! Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
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To Bet Against Brexit, Buy These 3 British Banking Stocks
Investors are less anxious about Britain leaving the EU than they were a week ago. This is because of the latest polls which show that there has been a significant momentum shift towards favoring a vote to remain in the EU. Polls are giving mixed results right now, but for the most part, it is a very close contest between leaving and remaining.
While polls are pretty much neck and neck, gamblers seem to believe that there is a very likely chance that Britain votes to stay in the EU. Betting odds currently give the “remain” side a 77% chance of winning, according to betting exchange firm Betfair. A spokeswoman for Betfair has said that there is about 43 million pounds ($63.21 million) being wagered on the EU referendum vote.
Gambling tends to come with the risk of losing everything, and that is not a very prudent way to play the odds, especially when polls are so close right now. A better way to play the positive momentum shift for the remain side is by buying up stocks which have seen their share prices take a beating because of speculation regarding the possibility of a Brexit. Such stocks include banks in the UK. These institutions have already been affected by negative sentiment stemming from Brexit fears.
British banks stand to lose a lot from a vote to leave the EU. Many believe that a Brexit will trigger a massive asset sell-off, which could really hurt the lucrative investment banking branches of banks. Bernstein analysts believe that a Brexit would result in significant depreciation for the pound as well as higher unemployment and lower house prices in the UK. All of these factors are expected to make loans funded by banks riskier because of the higher chances for clients to default on their debt obligations.
While a Brexit sounds scary, momentum has definitely favored the “leavers” over the last week. Many expect to see this momentum propel the remain side forward going into the vote, which is to take place on the June 23.
If you are feeling lucky, British banks may be the way to go right now. That is because even if you are wrong about a Brexit, you will still own shares which are trading at a significant discount relative to the stock price a year ago. Some of the downside to UK banks has already been realized on the share price front, and at the same time, there is a lot of upside with these stocks if a vote to remain in the EU prevails.
Lloyds Banking Group plc-(LYG - Free Report)
Lloyds Banking Group is a UK-based financial services company, whose businesses provide a range of banking and financial services. The company’s segments include UK Retail Banking, Insurance and Investments, and Wholesale and International Banking. Lloyds is a Zacks Rank #2 (Buy), and the bank trades at a forward PE of 9.69. It’s worth noting that the industry’s average forward PE is 10.7. LYG has a market cap of $73.51 billion, and it doles out a sizable 3.22% dividend.
The Royal Bank of Scotland Group plc-
The Royal Bank of Scotland provides financial products and services to customers throughout the UK and beyond. RBS stock is a Zacks Rank #3 (Hold), and it has a market cap of $40.34 billion. The Royal Bank of Scotland looks like a bargain across some fundamental valuation metrics. In particular, the company is trading at a price-to-book of just 0.46. When a company’s price-to-book is under one, it may be undervalued.
Barclays plc-(BCS - Free Report)
Barclays engages in several different businesses within the financial sector. The company’s businesses engage in commercial banking, investment banking, and providing insurance and other financial services. A majority of Barclays branches are located in the UK, but the bank also has over 1000 branches abroad. BCS stock is a Zacks Rank #2 (Buy), and it also gets a grade of “B” for value in our Style Scores. The company has a market cap of $43.35 billion, and it doles out a generous 7.43% dividend to shareholders.
Bottom Line
If you are betting against a Brexit, you can either risk losing all of your money wagered, or go with executing a method that comes with significantly less downside. If you buy these stocks and you are wrong about a Brexit, you still own shares in those companies. If you are right about Britain choosing to remain in the EU and you own these shares, the upside could lead to a massive surge for the bottom line of your investment portfolio.
The Zacks Rank is a truly marvelous trading tool. Our ranking system has beaten the S&P 500, yielding an average return of 25% per year for the last 29 years! Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>