Personally, I’d much rather snap up a different lowly-valued company in London’s top tier. Before revealing its identity, however, here’s why I’m not rushing to join the queue for the battered bank.

Why I’m avoiding Lloyds shares

Perhaps the biggest reason, at least right now, is Brexit. The manner of our increasingly messy departure from the EU looks like being decided at the very last minute. Should the UK and EU fail to agree on a trade deal, I think it’s likely Lloyds will bear the brunt of the fallout. A likely reduction in economic growth could put pressure on its share price, at least until the dust settles.  

A second reason I’m avoiding Lloyds shares relates to its exposure to the housing market. Being the UK’s biggest mortgage lender might not sound like a bad thing given how hot property currently is. Even so, I suspect it might get increasingly unattractive as the full economic impact of the coronavirus is felt.

The possibility of a third lockdown in January heaps yet more pressure on businesses. The extension of the furlough scheme until the end of April may soften the blow, but unemployment rates are surely still set to rise in the near term. This will put further strain on those already struggling to make their mortgage payments. Yes, another fall in interest rates might help but that’s also bad news for margins at Lloyds. 

Third, Lloyd yields less than 1% at the moment. This is problematic for me since the sizeable pre-coronavirus dividend stream was one of the biggest attractions for holding the shares. I’m not as optimistic as others that this will be hiked significantly in FY21. 

Taking all the above into account, I think there are far better ‘cheap’ stocks on the market right now. 

Better FTSE 100 bet

One FTSE 100 stock I’d be far more interested in buying at the current time is pharmaceutical giant GlaxoSmithKline (LSE: GSK). 

Glaxo is unlikely to be impacted by any political shenanigans in the same way as Lloyds. At the end of the day, people will always require what it produces, even if year-to-year earnings aren’t totally consistent. Moreover, its truly global geographical reach means Glaxo, unlike Lloyds, will benefit from a fall in the value of sterling in the event of no deal.

Then there’s the price. At less than 12 times expected FY21 earnings, GSK’s valuation feels dirt cheap to me for a major player in a highly defensive industry.

Another reason why I’d buy Glaxo over Lloyds shares is the possibility of further consolidation in the pharma space. AstraZeneca‘s planned merger with Alexion may push other giants to come knocking on Glaxo’s door in 2021.

A final motivation is income-related. A likely 80p per share return in this financial year gives a yield of 5.9%. For comparison, the best instant access Cash ISA available returns just 0.6% a year. 

All told, Glaxo seems a far better FTSE 100 buy at the moment, I feel. Lloyds shares could still make me money over the long term, but I’m not sure my patience will stretch that far. 

The post Investors are buying Lloyds shares. I’d snap up this cheap FTSE 100 stock instead appeared first on The Twelfth Magpie.

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Paul Summers owns shares in Scottish Mortgage Investment Trust. The Motley Fool UK has recommended GlaxoSmithKline, Hargreaves Lansdown, and Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

A global superstar

Over the years, Diageo (LSE: DGE) has managed to establish itself as a true market leader, thanks to a portfolio of over 200 different brands. This portfolio includes renowned brands such as Guinness, Gordons, Smirnoff, and Johnnie Walker, each with a large degree of consumer loyalty. Diageo also has presence in over 180 countries, making it a global superstar.

This global presence is why I believe this stock is perfect in this time of Brexit uncertainty. Indeed, unlike many other FTSE 100 shares, Diageo has very limited reliance on the UK economy. This is why I don’t think a no-deal Brexit would be catastrophic for its share price.

In fact, Diageo may actually be able to benefit from a no-deal Brexit. Although the company is London-headquartered, most of its earnings come from outside the UK. This means that a weaker pound is actually a positive for earnings. Therefore, as a no-deal Brexit would lead to the value of sterling sinking further, Diageo shares may receive a further boost.

This FTSE 100 stock is the perfect Brexit play

British American Tobacco (LSE: BATS) is another stock I’d buy in this time of Brexit uncertainty. Firstly, only 1% of its revenues are in sterling, and a weak pound is therefore a positive for the group. In fact, most of its revenues come from the US, which should be mostly immune from a no-deal Brexit. This contrasts to rival brands such as Imperial which has a much greater reliance within Europe. As such, this differentiate BATS  from rival brands and a number of other FTSE 100 shares.

Alongside the positive currency impacts that a no-deal Brexit could bring, I’m also impressed with the company’s new strategy. Recognising that the world is changing, the Group has started to introduce a number of new products deemed to be much safer than cigarettes. This expanded portfolio should help increase the longevity of the company and help it adapt to the changing environment. 

Overall, I’d therefore buy these two FTSE 100 shares to profit from the Brexit uncertainty. Of course, if a Brexit deal can be reached by 31 December, there may be more lucrative options elsewhere. These may include UK  banks and house builders. But although I own a number of UK-focused stocks, I won’t be buying any more right now.

The post A no-deal Brexit? I’d buy these FTSE 100 shares to protect myself appeared first on The Twelfth Magpie.

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Stuart Blair owns shares in Diageo. The Motley Fool UK has recommended Diageo. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

As unsettling as all this might be for an already-skittish market, I don’t think it should bother Foolish UK investors all that much. Indeed, in my view, now is precisely the time to follow the guiding principles of the world’s greatest stock picker, Warren Buffett.

Buffett would buy the (Brexit) fear

Investors might assume that Buffett’s wisdom has little relevance as far as Brexit is concerned. After all, the ‘Sage of Omaha’ has invested most of his time, energy, and money into US businesses.

I disagree. Buffett’s philosophy is universal because all investors endure the relentless internal battle between greed and fear, no matter where in the world they might be, or what the current ‘crisis’ is. 

Buffett’s recommendation that we should “be greedy when others are fearful” is therefore pertinent when it comes to Brexit. There’s certainly plenty for businesses to be scared about right now. As well as being prevented from recruiting staff from the continent, many will worry about raising prices on products they sell, tariffs and delays at ports. 

I see this is an opportunity for UK investors. The fact both sides will emerge as losers from a disorderly Brexit must be borne in mind. As such, I think it’s important to keep buying stocks, even if their prices remain volatile going into 2021.

But what should investors be buying? Again, I’d follow Buffett’s lead.

Look for quality

He concentrates on finding quality stocks. For him, these are companies that have some sort of ‘moat’ — a competitive advantage that rivals find tough to erode. On top of this, Buffett looks for consistently rising profit margins and low debt.

But not paying too much for stocks is also important. Right now, I suspect the UK stock market still offers significant value, particularly relative to Buffett’s own US market. As a result, I’d be looking for domestically-focused firms that have little reliance on the EU. Alternatively, I’d buy FTSE 100 stocks that, thanks to having operations across the world, derive only a modest amount of their revenue and profits from across the Channel. 

Hold “forever”

One reason why Warren Buffett is so wealthy is down to the fact he sets out to hold stocks “forever”. In other words, he doesn’t get shaken out of great businesses for political or economic reasons. He regards himself as a business owner, not a share price speculator. 

Here at Fool UK, we adopt the same mentality. It’s not pleasant to see a portfolio temporarily fall in value. However, history shows the trajectory of share prices over the long term is most definitely up.

Knowing that even a global pandemic couldn’t stop the ascent of share prices for long gives me confidence that buying stocks at the height of the Brexit crisis will also turn out well. I suspect those adopting Buffett’s way of thinking will be richly rewarded… in time.

The post Forget Brexit. I’d use the Warren Buffett method to get rich! appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Several business leaders have spoken out, warning that a large proportion of companies are still not prepared for such an outcome. However, a last-minute deal could always happen.

The uncertainty surrounding both Brexit and Covid-19 has created significant volatility in the value of the pound. And that’s where an opportunity to both protect and grow wealth exists.

An opportunity to profit from a no-deal Brexit?

Outside the realm of stocks, numerous other financial instruments exist. When it comes to currency, specialised contracts called currency and FX swaps are the two most popular.

But these derivatives are complex, and even a seasoned professional can make severe mistakes. Luckily you don’t need to be an expert thanks to the UK stock Alpha FX (LSE:AFX).

Alpha is a currency risk management and payments solutions business. The firm operates in over 30 countries, assisting companies in protecting their revenue streams from currency exchange risks using the previously mentioned derivatives.

Unlike most other businesses, uncertainty is fantastic news for Alpha. Large swings in currency prices create better opportunities to protect as well as grow the income of their clients.

How Alpha’s cost structure beat the banks

Typically, currency hedging services are offered by large banking institutions. However, this can be quite a considerable expense, especially for smaller businesses.

The payment structure designed by Alpha removes that barrier to entry. The firm does not charge any consultancy fees as a bank would. Instead, it charges commission fees on all trades committed on behalf of their clients.

This approach makes the service far less expensive and, therefore, more accessible to small and medium-sized enterprises.

Alpha focuses purely on the trading aspect of risk management. As such, there is no need to spend money generating reports of currency forecasts, timing dossiers, or market commentary for clients. While commissions don’t yield as much as a consultancy fee, this lower cost of operations creates an operating profit margin of 40%!

A hidden second opportunity within the same UK stock

But beyond its risk management services, Alpha also has a division dedicated to processing digital payments for enterprises.

Cashless transactions continue to become more prominent among consumers, thanks to companies like Visa and MasterCard. But when it comes to large international business transactions, the infrastructure is still underdeveloped.

This ultimately causes inefficiencies which Alpha is eliminating with its international payment solution. Just like other payment processors, the stock charges a small fee for each transaction made through its network.

The bottom line

A no-deal Brexit is looking more likely with each passing day, and so I believe Alpha presents a fantastic opportunity to protect my wealth while uncertainty reigns in the UK economy.

In addition, the payments solutions side of the business looks incredibly promising in my eyes. Therefore, I expect the stock to continue performing well, even after stability has returned to the UK market.

The post No-deal Brexit: I’d buy this UK stock to protect my wealth appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Zaven Boyrazian owns shares in Alpha FX and MasterCard. The Motley Fool UK has recommended Alpha FX. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.