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Portfolio Positioning For Brexit Vote

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#1

Hi All,

I am considering whether to sell some of my holdings ahead of the Parliament vote on Brexit due Dec 10th-ish(?) in preparation for buying back into them soon afterwards. Seems almost (?) certain that the deal will be voted down and we will be off into political limbo with no deal brexit, PM change and general elections all a real possibility. Inevitably the market will react to these likely negatively in most cases, but the £ will probably drop a lot on the day of the vote (if it fails) and those FTSE 100 stocks most exposed to $ earnings will likely do well - thats what happened with the brexit referendum vote after all.

So what I am I considering selling:-

  1. Asset Managers (LGEN, AV & SLA) - all have reacted very negatively to such events previously. Recovering afterwards.
  2. UK Banks - Most notably LLOY.
  3. Housebuilders (PSN, BDEV, TW etc) - as per 1 & 2 above.
  4. Utilities & REITs - see article below.
  5. Thinking about my ETFs that track the FTSE. Suspect these will take a hit on the day of the vote.

Will definitely hold my overseas stuff especially things that are largely USD & EUR denominated. Seems that healthcare and oil/gas might also be things to continue to hold.

Appreciated any considered views on this strategy.

ATB

Pref

PS Further reading of the linked article (in particular see Figure 9) indicates that I should have added Insurers, REITs, Retailers, Telecoms and Travel & Leisure to the list of sectors to avoid. Interestingly they show Utilities as being positively affected, but I personally am steering clear of those ATM due to the Corbyn threat.


#2

Hi Pref

Very heavy UK centric portfolio - Generally Sell All where in profit.
Forget buying back now which you might / might not do in future.
Whats your individual weightage matters a lot.

  1. Asset Managers - Not HIGH Risk
    LGEN steady business even without growth
    AV & SLA (Dont know their portfolios) but not as risky as seem.

  2. UK Banks - Sell All if in profit.
    LLOY 54ish is a buy depends on your average.

  3. Housebuilders;
    Hold unless something individually wrong with PSN BDEV TW
    If they are building newer homes then they are investing for future, I wouldnt be deterred by overall housing market sentiment.

  4. Utilities & REITs
    Sorry I didnt read the article on purpose as I would rather share my own instinctive thoughts in as pure form as possible.

    Utilities -
    Same as housebuilders, if individual company is ok then no reason to rush - plenty to grow for next 5 years.

    REITs - mostly Commercial ? which area ? which sector ? not sure ? bin them now.

  5. FTSE Tracker ETF
    We have spoken about this few times.
    If youre confident to use ETF Tracker
    You should consider Inverse ETF as well.

This isnt the time but am curious as to why you have chosen FTSE Tracker ETF as well as invested in FTSE companies ? as the Tracker would do that for you anyway - I am assuming it was Dividends ?

So either you monitor all investments at once
or
or Just get one Inverse FTSE - ETF and monitor it

Since thats not something you would risk (from previous conversations)

Sell and stay out.
There’s nothing wrong with staying out of the market.


#3

hi @brownadder,

Well thanks for your thoughts but Im not sure I agree with some of them.

Asset Managers - experience just recently, and on the brexit referendum vote, was that these dropped significantly. I expect them to do so again. NOT saying that they arent good investments, just that the opportunity is there to sell and buyback cheaper.

UK Banks - I expect LLOY will take another hit. I am not in profit but I would welcome NOT being at an even greater loss. Again a good sell and buyback opportunity I think.

Housebuilders - share prices close to halved after the referendum vote. Good luck staying invested there at this time. Again not saying they arent good companies to own. Just that there is a BIG short term risk in holding them, I think.

Utilities - Good luck holding these if a GE gets called. The rush for the exits will be extreme is my guess.

REITs - If you had read the article you would know that these too took a big hit after the referendum.

ETFs - My ETFs are described as dividend ETFs as they pay a good dividend. BUT as the UK based ones hold a lot of FTSE 100 stocks in practice if you look at their charts over time they track the FTSE 100 - not day to day but over an extended period they do. But I dont hold things like ISF which IS a FTSE 100 tracker. But if there is a big one day FTSE hit then my dividend ETFs will likely get hit as well (eg some of them hold a lot of housebuilder shares).

And yes I can see that there probably is a good case to be made for holding a leveraged inverse tracker over the couple of days around the parliamentary vote. As you know I am not mad keen on them otherwise.

ATB

Pref


#4

Hi

Its a bit late to think why you got into these and/or didnt sell earlier as Brexit is now a 2 year old story.

If only option to you is sell at loss now then I guess that’s what it is - to avoid further loss.

PS I am not involved in any of the above or any FTSE stock, I will get back in after Q1/2019 - I did buy LLOY few days ago for my brother. 55p LLOY is a good buy.

I hope you find a solution to this predicament.


#5

Predicament ?. More of an opportunity I’d say…

Not sure LLOY at 55p is going to be in profit after the brexit vote myself… ok long term I agree. We got down to 54.5 after the last brexit scare. Suspect that the real vote may take us lower still myself.

Personally stop lossing LLOY day by day and hoping it gets back to close to 59 before the vote when I will sell whatever. Then down we go again IMHO.

ATB

Pref


#6

Pref - the logic is certainly there in your strategy. Though as always, you have to ask yourself - are you investing, or are you trading?

Most, possibly all of the sectors you highlight as a SELL are already trading at depressed valuations on almost all measure, in absolute terms and relative to both the market and their own history. Doesn’t mean they can’t go down further of course, particularly in this, illiquid and unusually dysfunctional market, but you have to consider the “travel and arrive” tendency of markets.

You appear to infer that Parliament will vote the Brexit deal down initially, but then some sort of decent resolution will be reach thereafter. Personally I agree - I think Parliament will throw it out at least once, but with a bit more shouting and posturing (most of this is theatre, after all, much more than usually) the realisation that this really is the best deal we can get (probably with a few, minor and symbolic, concessions, etc) will see it reluctantly passed, for the “good of the country”, etc.

In which case, the sectors you highlight will undoubtedly do well, indeed may well perform very strongly for quite a while. But whether you will be able to get back in at even better prices is more doubtful - timing the market is notoriously difficult at the best of times, and this could be a period of exceptional obfuscation and noise.

If you, or anyone else, think it will be voted down, and the result will remain be “no deal”, then you may well be right to sell and stay out. But I can’t help feeling that for many of these sectors, or at least, a fair few of the stocks therein, the most rewarding strategy will be to stay invested for the longer term, with an investment horizon well beyond the near term Parliamentary charades and whatever fall-out they lead to.


#7

Hi @newbill1703,

Well if “investing” means sitting on your hands when it’s clear that you are almost guaranteed to lose money in the short term, then I guess I’m “trading”. But only with the VERY short term objective of lowering my average for stocks that I still want to be in.

Re your inference that I think that the deal will ultimately be passed by Parliament, no I really don’t think that will ever happen myself. TM would have turn the DUP and sufficient members of the firmly opposed conservatives and I can’t personally see any chance of that. No I think its no deal brexit, TM gone (probably) and maybe even an election. I’d like to say I’d hope that there might be a second referendum, but that seems pretty unlikely as well.

However all that politics stuff works out it seems pretty certain to me that after the first vote the markets are going to see us in nomansland looking down the barrel of a no deal brexit and recent events have shown us pretty clearly how they will react. Doing nothing will therefore inevitably lead to short term losses, possibly quite significant losses. Why sit still for that when one can see the axe approaching ?.

As I have written previously, my approach is driven by capital preservation and loss avoidance. I believe that there are times when just sitting on your hands is not the right thing to do.

ATB

Pref


#8

I’m not sure that it’s unlikely.
It is most likely that the Deal will be voted down … and same for the inevitable tweaked amendment… then we are into unknown territory… and it is likely that the easiest way out will be for a majority of MPs to vote for an extension to Article 50 to allow for a #BrexitRef2 later in 2019… and the most likely consequence of that will be remaining in the EU (hooray).


#9

Hi @j_westlock, Well I wouldn’t be unhappy with that outcome, I voted remain in the referendum. But to get to that point TMs deal will need to be voted down and everyone will need to look hard into the resulting abyss. Markets will tank at that point is my guess and yes will likely recover strongly if another referendum IS the eventual outcome.

But you will understand that my plan is to exploit the drop in the markets that will result from the deal being voted down - and that is the whole purpose of my post. Regarding what will eventually happen on brexit I am not prepared to venture any prediction and am sadly resigned to ANY of the possible outcomes.

ATB

Pref


#10

Might I please make a request at this point, that being that any further posts to this topic address themselves to the question raised in my original post ie how to best position your portfolio ahead of brexit deal vote in parliament.

I really really really dont want this topic to turn into a brexit discussion. If it does then I for one will take no further part. If you want to discuss this well worn subject then please do it somewhere else !.

Thank You !

Pref

PS Took out the capitals just for you frog !. ATB


#11

Really, Pref, there is no need to shout. We are interested in your thread.

Cheers,

Frog


#12

Hi @frog_in_a_tree, Just occurred to me that having mentioned brexit in a previous post I might have inadvertently opened the floodgates to a deluge of (to me) pointless brexit posts. Quite happy for people to discuss that stuff, it’s just that I have zero interest in hearing about it…

ATB

Pref


#13

Prefinvestor and Bill “sell up” on coming fall …
XXXXX
Corbyn threat ??
Talk some weeks ago Jhon McDonnell might move against him .
He seems to be warming to a peoples vote .
Not sure the establishment were ever keen on us leaving no matter what the masses voted for .
Not Ireland or Holland so had to be more careful about how they made us have a second vote .


#14

Not sure that trying to understand the motivations of a set of orcs (Please forgive the Lord of the Rings reference) is worthwhile. They are all as extreme and crazy as each other IMHO…

One would hope that there is no way they could get elected, sadly that was not proven to be the case last time out. If there is a general election I shall probably sell everything.

ATB

Pref


#15

A reminder:
"
Might I please make a request at this point, that being that any further posts to this topic address themselves to the question raised in my original post ie how to best position your portfolio ahead of brexit deal vote in parliament.
"


#16

Yes OK I get your point.

Pref


#17

Hi Pref

Hope all well with you.

Interesting topic post.
I can understand your thinking as you have stressed you are aiming at capital preservation ( logical and sensible )
Tough call.

Going through the sectors you have mentioned .

  1. Asset Managers.I am a fan of both LGEN & SLA, consider them a touch oversold, could go lower of course. In a no deal or GE scenario, quite likely would but with later recovery. I no longer follow AV. so no opinion on that.

  2. UK banks. BARC & LLOY, maybe both a sell but do wonder if at current levels much of the fear is priced in ? If a GE occurs LLOY would drop, beyond a doubt to me.It faces various headwinds anyway.

  3. Yes, Housebuilders agree a sell, have made a lot trading them but currently out.Could recover
    strongly though in the event of a Brexit extension/2nd referendum.

  4. Utilities & REITs.

On a GE the former would drop but am a mild fan of the sector.
REITS. Probably also drop but am invested in 4 of them and staying put, will risk a drop.

  1. FTSE ETF trackers. Sorry no particular view, I use them for trading/hedging purposes only. Both short and long.

My gut feeling is that you would probably feel more comfortable selling some of your investments off.
If so that would be the correct personal decision.

IMO

ATB whatever you decide.

soi


#18

Hi @soi,

Similar thinking then. I am pretty well committed to this plan now, have been through my portfolio today and identified 11 holdings which are all UK domestically focussed (stocks, etfs and investment trusts). Have put “upper limit to sell” orders in place on each based on their highs over the last two weeks, will sell either manually or if out I may set stoplosses intraday (don’t like leaving them in place overnight due to gapping).

Actually I think that the FTSE may well do OK for a while (maybe even up until the date of the vote) as the EU endorsing the deal plus TMs charm offensive will I think give rise to hopes that the deal will get done. I personally still expect these hopes to be cruelly dashed at the vote Dec 10/11 though as I cant see many intransigent MPs of any flavour responding to TMs call to act “in the national interest”. The parliamentary arithmetic is I think not a hurdle she is likely to be able to overcome. Just my own opinion obviously.

ATB

Pref


#19

Hi @Ripley94, By the “corbyn threat” I mean labours policy to re-nationalise a whole load of things such as water, energy and rail amongst others. See article below:-

Likely not workable but that’s another story. They’ve also said that they dont intend to pay shareholders full compensation, especially where they think that the privatised companies have been too generous with dividends in the past.

Apologies if you were already aware of all this…

ATB

Pref


#20

Hi All,

Sitting here with <10 minutes to go to the open on Monday 26th November, IG has FTSE up 0.8% right now and I am expecting a very positive open. IMV this will have happened because of the good brexit vibes arising from the weekends events, EU ratification and TM campaign to get voters on side. I am going to be watching LLOY particularly closely as I am expecting it to fly this morning as pretty much THE most bexit correlated stock that there is. Had set a “sell limit” of 59.5 but have just cancelled that as I am concerned that this might just be at risk if it does REALLY well. I shall take a view on what to set this to after the market has been open for a bit.

None of this in any way changes my view of whats going to happen when the brexit vote happens. I just think that right now the brexit mood music is positive, US futures are up, even oil is back over $60 so the FTSE will likely do well for a bit.

Soon see…

ATB

Pref