Ever since Britain voted to leave the European Union, the UK stock market has been a bit confused. We don’t exactly know how Brexit could negatively impact stocks and many investors are reluctant to spend their money until the storm has blown over.
The potential for a second referendum really does appear to be on the cards, which could mean that we end up remaining after all. I believe cancelling Brexit will lead to some stocks skyrocketing, here’s why I will invest in these stocks right away if we remain.
Flying high
easyJet (LSE: EZJ) is the first company that I would have my eye on if Brexit were to be cancelled. The dark cloud of the EU exit has been hanging over the company recently, with net losses quadrupling in the first half of this year to £218m.
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However, things could be looking up for this discount airline if the government (or a future government) were to do a U-turn. It would benefit from the higher pound and lower fuel costs if Brexit were to disappear, which should result in higher demand for the company’s services.
Furthermore, it relies on short-haul flights, predominantly from the UK to other EU countries. If Brexit happens, the company would have to take a closer look at its ownership structure to ensure that it could even keep serving EU customers. easyJet has already set up an operation in Austria to counteract this, but the transition certainly wouldn’t be quick and easy.
Banking on it
Lloyds (LSE: LLOY) shares have dropped 10% since June 2016. If the looming Brexit was no longer in the picture, The Bank of England’s guidance has hinted that interest rates would immediately be increased. This would benefit Lloyds and could help to increase the share price in the long run.
With a dividend yield of 5%, this stock isn’t a bad deal at the moment and even if Brexit were to go through, it could be a boost for the bank as it’s the uncertainty that’s damaging the financial sector at the moment.
CEO Antonio Horta-Osorio acknowledges that Brexit brings problems but remains upbeat. He said: “While Brexit uncertainty persists, and continued uncertainty could further impact the economy, I remain confident that our unique business model… will continue to deliver superior performance and returns for our customers and shareholders.”
I will definitely be keeping an eye on Lloyds in the coming weeks/months as we hopefully begin to see more certainty surrounding Brexit.
Eating out
The Restaurant Group (LSE: RTN) is the last (but definitely not least_ on my post-Brexit-cancellation radar. Dining chains have been stretched and challenged by the increasing popularity of online delivery apps, let alone Brexit.
However, it acquired popular Asian-themed chain Wagamama to add to its group last year, with the hope of turning things around. If Brexit were to be cancelled, the Restaurant Group could potentially benefit. Food price inflation could be capped thanks to sterling growing stronger and a pool of young and affordable labour would be readily available from the EU.
The weak pound and labour tightening meant that wages and cost of ingredients added a whole £17 million to expenses in 2018. If Brexit falls through, the Restaurant Group has the opportunity to rise above these challenges and have more money to spend elsewhere.
