The retailer that has had it tough due to the weak pound is Halfords (LSE: HFD). Although it’s still on track to meet its full-year expectations, Halfords says in today’s update that it has experienced cost headwinds because of the depreciation of sterling. Due to the potential for sterling to weaken yet further versus the dollar as Brexit negotiations begin, it could experience more difficulties over the medium term.

Although the company has developed initiatives such as alternative product sourcing and generating efficiencies to mitigate against a weaker pound, Halfords is likely to continue to struggle with higher import prices. Its earnings declined by 13.5% in the first half of the current year, with it being unable to pass on the additional costs to consumers. Therefore, while Halfords’s sales increased by 6.3% in total and by 2.2% on a like-for-like (LFL) basis, its margins were squeezed. In fact, Halfords recorded a fall in retail margins of 2.75% versus the same period of the prior year. This trend looks set to continue as sterling weakens.

Super-sized sales

Of course, a weaker pound is good news for other retailers. Fashion retailer SuperGroup (LSE: SGP) also reported today and its sales for the first half of the year increased by 31.1%. Its performance in non-UK markets was given a boost by weak sterling, with currency effects contributing one-third of the total rise in revenue versus the same period of the prior year.

Looking ahead, SuperGroup’s gross margin is likely to come under pressure. This is due to higher sales of lower margin wholesale items, as well other one-off costs as the company continues to reorganise. However, its potential to grow outside of the UK has been enhanced by new distribution facilities in the US and Europe. This should allow it to open more stores and benefit from the potential for weaker sterling over the medium term.

SuperGroup trades on a price-to-earnings (P/E) ratio of 19.3. Although this is relatively high, the firm is forecast to increase its bottom line by 11% in the next financial year. This means that it has a price-to-earnings growth (PEG) ratio of only 1.75, which indicates that it offers good value for money.

Although Halfords has a lower P/E ratio than SuperGroup at 10.8, it’s due to record a fall in earnings of 8% over the next two years. Alongside the potential for a weaker pound and Halfords’ apparent inability to pass on price rises to customers, this makes it a stock to avoid at the present time. That’s especially the case with Brexit likely to cause the pound to weaken even further in 2017.

The post Weak sterling boosts one retailer and beats another 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?

Peter Stephens has no position in any shares mentioned. The Motley Fool UK has recommended Supergroup. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Headline numbers

On this front the post-Brexit data has been largely reassuring. According to the Office for National Statistics (ONS), domestic GDP grew by 0.5% year-on-year between July and September. This goes some way to disproving the widely-held notion that the bottom would fall out of the economy immediately following the Brexit decision.

However, it doesn’t mean we should be complacent. The latest GfK consumer confidence study found Britons growing more negative about the economic outlook over the coming year, which is bad news for an economy as dependent on consumer spending as ours.

Employment                          

Here the results are also mixed but mostly positive. The headline unemployment rate in the three months to August stayed level at 4.9%. 10,000 people did join the ranks of the unemployed but this was largely due to more people beginning to actively search for work, a positive sign.

On the downside, wages grew by only 2.3% year-on-year, slower growth than in the preceding month. Any wage growth is certainly a positive, but we will need to see this number increase alongside the rising inflation we’re currently experiencing to ensure households aren’t forced to significantly throttle spending or saving.

Sterling                                                                                                                

There’s no way to sugar coat the fact that the pound is currently the worst performing major currency over the past year when compared to the US dollar. Broadly speaking, this represents negativity towards the future performance of the UK economy on the part of foreign investors (although the highly dollar-denominated FTSE 100 is performing admirably well).

The effects of slumping sterling on the real economy are mixed. For every manufacturer who receives more foreign orders for export, there’s another suffering from paying higher prices for imported inputs. And as seen with the tussle over Marmite pricing between Unilever and Tesco, retailers will sooner or later be forced to pass on higher input costs to consumers or take the hit themselves and watch margins shrink.

Business confidence

The latest purchasing manager indices (PMI) from research outfit Markit paint an ambiguous picture of the domestic economy. October Manufacturing PMI fell month-on-month from 55.5 to 54.3, which indicates businesses are still highly positive but becoming less so, largely due to higher input costs thanks to the falling pound. Service sector businesses are also positive but becoming more tentative as month-on-month PMI results fell from 52.9 to 52.6 in September (Anything less than 50 is contraction, while above 50 is expansion), coinciding with increased talk of a ‘hard’ Brexit.

What do these data points signal in aggregate? Mainly that the economy is continuing to move along nicely but there are potential bumps in the road. That means the best course of action for retail investors is to continue searching for quality companies trading at reasonable valuations and not make rash decisions until we know what shape the post-Brexit EU deal will take.

The post Should the cold, hard data about Brexit change how we invest? 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?

Ian Pierce has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Millennium & Copthorne

Today’s update from Millennium & Copthorne (LSE: MLC) shows that the hotel company has benefitted from sterling’s slump. It added £43m to its revenue of £615m and £7m to its £98m pre-tax profit for the first nine months of 2016. And with sterling likely to weaken even further over the coming months as Brexit discussions begin and US interest rates rise, Millennium & Copthorne’s financial performance could continue to improve further.

However, the underlying performance of the company was far less impressive. When the impact of sterling was excluded from the results, Millennium & Copthorne’s revenue for the first nine months of the year fell by 3.2% and its pre-tax profit was 2.9% lower than the same period of the previous year. That’s partly because of challenging trading conditions in its New York and Singapore hotels, with margins in particular being disappointing.

Looking ahead, Millennium & Copthorne is forecast to grow its earnings by 33% in the current year, but then they’re due to flatline next year. Taking into account the current year’s impressive growth (which is due considerably to weaker sterling and would be dented significantly if and when sterling eventually rises), Millennium & Copthorne trades on a price-to-earnings (P/E) ratio of 16.8. Given its difficult outlook, this means that it lacks appeal at the present time.

Asos

Online fashion retailer Asos (LSE: ASC) is also benefitting from weaker sterling. Its US sales increased by an extra 10% (50% versus 40%) because of the impact of sterling in the most recent financial year. Although the firm is winding down its China operations, the EU, America and rest of the world remain key growth markets for its fashion offer. If sterling weakens further, its top and bottom lines should receive a positive catalyst in the near term.

In fact, Asos has a bright growth outlook. Its bottom line is forecast to rise by 22% in the current year, which is a much higher rate than that of the wider market. However, much of this growth appears to already be priced-in, since it trades on a price-to-earnings growth (PEG) ratio of 3.1. This indicates that there really is little upside potential, while its downside risk is high should its sales performance come in below guidance.

Although this is undeniably a high quality company with a sound strategy and business model, its valuation is simply too high to merit investment. That’s the case even if the pound continues its downward slide.

The post 2 stocks I’d avoid despite profiting from sterling’s slump 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?

Peter Stephens has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended ASOS. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Diverging earnings outlook

Since the EU referendum of 23 June, analyst earnings forecast revisions for the two banks have diverged sharply. Expectations of Lloyds’ earnings have gone down by 6.0% for 2016 and 13.2% for 2017, while HSBC’s expected earnings for HSBC have improved by 3.5% and 0.6%, respectively, for those two years.

Because of Lloyds’ much greater exposure to the UK economy, the Brexit vote has hit the bank hard in two ways. First, slowing growth in the UK economy has hurt the bank’s outlooks for loan demand and credit quality. Second, the Bank of England’s August rate cut will likely reduce the bank’s net interest margins — the spread between what banks make on loans and pay for funding.

HSBC is affected in much the same way, but because of its global diversification, the bank is less exposed to headwinds from the UK market. Meanwhile, because of the falling value of the pound, the sterling value of its overseas earnings have hugely improved since the Brexit vote.

Also, following the disposal of its Brazilian unit and a dividend from its US business, HSBC is buying back some $2.5bn of its shares. This reduces the bank’s outstanding share count, which gives a boost to earnings per share.

Short-term phenomenon

However, the weak pound is only likely to be a short-term phenomenon. HSBC’s underlying fundamentals remain weak because of slowing economic growth in emerging markets and its high cost structure. Despite efforts to become more efficient, HSBC has a cost to income ratio of 63.2%, compared to Lloyds’ 47.8%.

Moreover, credit quality is deteriorating faster at HSBC than it is at Lloyds. For the first half of 2016, loan losses rose 64% at HSBC, compared to an increase of 37% at Lloyds for the same period. Lloyds also has a higher CET1 capital ratio – 13.0%, compared to 12.1% for HSBC.

What’s more, with earnings expectations cut back for Lloyds and valuations in the bank already heavily marked down, there is significant upside potential from Lloyds delivering better than expected results. This could come from many things, but will most likely be due to a more-resilient-than-expected UK economy.

Bottom line

It’s quite possible that HSBC will continue to outperform Lloyds for some time. After all, it’s clear that investors are shunning domestically-focused firms in favour of big “dollar-earners” — companies that earn most of their earnings overseas, and which are therefore benefiting from the pound’s weakness.

However, I expect Lloyds to outperform HSBC in the longer run due to its better underlying fundamentals. Valuations for the bank are also more attractive, with shares in Lloyds trading at 8.7 times this year’s expected underlying earnings, compared to HSBC’s multiple of 13.6.

The post Can HSBC continue to outperform Lloyds? appeared first on The Twelfth Magpie.

More reading

• Is there any value left in Lloyds shares now they’re over £1?
• Up 250%! Here’s why I bought HSBC shares over SpaceX stock
• Prediction: this UK growth stock will outperform Lloyds shares over the next 5 years
• Barclays, NatWest or Lloyds shares: which is the better pick for a UK retirement portfolio?
• How much might £19,999 in a Stocks & Shares ISA be worth by 2036?

Jack Tang has a position in Lloyds Banking Group. The Motley Fool UK has recommended HSBC Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

One of the companies that could benefit the most is luxury retailer Burberry (LSE: BRBY). Aside from the obvious positives come earnings season when foreign currencies are translated into relatively weaker pounds, Burberry also stands to benefit from increased tourism to the UK. This is important as around half of Burberry’s European sales are to foreign tourists.

Of course, you shouldn’t buy a company simply because of currency fluctuations, so what does Burberry’s underlying business look like moving forward?

There’s no getting around the fact that the short-term outlook is muddled at best. Luxury consumption in China is falling quickly due to anti-corruption schemes and slowing economic growth, all of which is sending comparable sales in key Asian markets down in double-digits and keeping overall global revenue flat.

However, for long-term investors I see significant positives in owning Burberry shares. First off, the company’s brand name is among the best known in the world. This protects Burberry from many of the cyclical problems lower end retailers face. We’re told trench coats are cool this year but Burberry knows how to sell them even when they’re not the hottest fashion item. That means higher margins and relatively stable sales year in and year out. 

Second, the company is in a strong financial position and had £660m in net cash at the end of March. Most importantly, Burberry is adapting quickly to major changes in the fashion industry. It’s moving faster than luxury peers in embracing digital sales and engagement with consumers and is a pioneer in slashing the amount of time it takes new designs to move from the catwalk to retail stores, a critical change given today’s consumers demand for instant gratification.

A forward-looking management team, incredible pricing power, global reach and long-term potential in increasingly wealthy Asia makes Burberry even more attractive to me given the slumping pound.

Now for something completely different

With only 2% of revenue coming from the UK, agribusiness giant Tate & Lyle (LSE: TATE) is essentially British in name only at this point. That’s great news for the company when earnings season rolls around, especially when combined with an underlying business that’s notching up very impressive results.

The key to Tate & Lyle’s success has been shifting focus from lower-margin bulk ingredients sales to higher-margin speciality products such as Splenda. Relying more on these value-added goods sent adjusted constant currency profits up 1% year-on-year in 2015.

This may not seem like a large increase, but it was very good news considering the company is in the middle of a long-term strategic turnaround that involves costly restructuring and requires large investments in new business lines that are still in the development phase.

Further positives were an improvement in the company’s balance sheet as net debt fell from £555m to £434m last year, representing a very healthy 1.2 times EBITDA. Rising margins, falling debt and a very good 3.5% yielding dividend make Tate & Lyle an attractive option to me even without the positive effects of a weaker pound.

The post The plummeting pound makes these stocks even more attractive appeared first on The Twelfth Magpie.

More reading

• UK shares: there’s a reason so many foreign buyers are circling!
• This FTSE 100 share pays no dividends. Could that change?

Ian Pierce has no position in any shares mentioned. The Motley Fool UK has recommended Burberry. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Here are two FTSE 100 companies I expect to boost their dividends substantially in the coming months.

Improving earnings outlook

Going by the recent British American Tobacco (LSE: BATS) recent operating performance, I’m confident the tobacco giant will raise its dividend very soon. Revenue for the company grew by almost 8% year-on-year in constant currency terms during the first half of 2016, as core brands benefitted from higher sales volumes and good pricing. Adjusted diluted earnings per share were up by almost 11%, with further profit growth likely to be weighted towards the second half of the year because of short-term currency headwinds.

The company, which earns most of its revenues in emerging market currencies, had been hard hit by the slump in the Russian rouble, Brazilian real and South African rand. However, as these emerging market currencies have strengthened considerably against the pound following the Brexit vote, its full-year earnings are set to get a rather significant boost.

Following a series of healthy upward revisions in recent weeks, city analysts now expect the company’s earnings per share will grow 17% this year, to 244p. And on top of this, adjusted EPS is forecast to grow another 12% in the following year, to 274p.

That’s great news for income investors, because rapid earnings expansion is almost always the precursor to robust dividend growth. And while the pace of dividend growth has slowed in recent years (from 17.1% in 2010 to just 3.8% for the most recent interim dividend), British American Tobacco should once again be in a strong position to re-accelerate dividend growth thanks to its improving earnings outlook.

Scope for dividend growth

Meanwhile, publisher Relx (LSE: REL) is expected to post a 16% rise in adjusted EPS this year, with a further increase of 10% pencilled-in for 2017. Like British American Tobacco, Relx generates most of its revenues from outside of the UK, which allows it to benefit from improved sterling earnings translation of its foreign income.

But in addition to a weaker pound, Relx is set to benefit from the sector’s shift from print to digital. The company’s specialisation in scientific and medical publishing and its rich datasets give the company a unique competitive advantage as the market undergoes a structural shift. And already there are signs that it’s doing well in leveraging its strengths. Adjusted operating margins have improved from 27.6% in 2012 to 30.5% last year, thanks to the fixed costs of running digital infrastructure.

Quietly, Relx has also put together an impressive dividend growth story. Over the past three years, dividends have grown by an annual compound average growth rate of 8.9%. With an attractive earnings outlook and a dividend coverage ratio of two times, Relx is in a strong position to reward shareholders with increasing dividend payouts in the future. 

The post Why I think these 2 stocks will boost their dividends appeared first on The Twelfth Magpie.

More reading

• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?
• Double a state pension thanks to dividend shares? Here’s how it could be done
• How much second income am I aiming for with £20,000 in this superb FTSE 100 dividend star?
• The top 3 FTSE shares for beginner investors to consider buying in 2026
• Could a second income become more important than a pay rise?

Jack Tang has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

This strength does have some logic. After all, the FTSE 100 is packed with companies whose massive international exposure minimises the possibly-negative implications of the leave vote. And of course many stocks with huge overseas operations also stand to gain from heavy sterling weakness in the months — and possibly years — ahead.

Pound perils

Indeed, demand for the UK’s big-caps could carry on rising should the pound continue to haemorrhage value as many experts are predicting.

Both HSBC and Goldman Sachs are convinced that sterling will plumb to 1.20 against the US dollar by the end of the year, worsening from the 31-year trough below 1.30 hit in recent days. And Deutsche Bank expects a slip to 1.15 in the months ahead.

Bank action

As well as reflecting fears concerning the domestic economy, the pound has also lost value as the market expects an imminent interest rate cut by the Bank of England.

However, this may not be the only round of action bank governor Mark Carney and the Monetary Policy Committee may have to take, with Nomura expecting another rate reduction in November.

On top of having further negative implications for the pound, the prospect of extra liquidity flooding into the system could bolster the FTSE 100 still further.

Withdrawal symptoms

The appointment of Theresa May as prime minister — thereby truncating a possible three-month wait for the next PM — has also propelled the FTSE 100 recently, soothing the nerves of those fearing a prolonged British withdrawal from the EU.

Although a remain supporter prior to June’s vote, May has vowed since then to deliver Brexit. But this is unlikely to be the end of the matter. Indeed, other EU leaders are likely to try to play hardball concerning access to the single market, a development that could still lead to huge delays in Article 50 being triggered.

Meanwhile, the likelihood of last month’s referendum being upheld remains a bone of contention as calls for a Parliamentary vote on the matter circulate; lawmakers pore over the whether Brexit is constitutionally viable; and the government negotiates while trying to hurdle a severe economic shock and possible break-up of the UK.

In other news…

The tetchy political landscape isn’t the only factor that could send the FTSE 100 sinking again. As I’ve long argued, the index’s huge weighting towards energy and mining leaves it in danger of a correction should supply and demand indicators continue to worsen.

For one, the stream of disappointing economic data from China is unlikely to end soon, piling further pressure on commodities suppliers.

On top of this, Britain’s blue chips aren’t completely immune to the prospect of a domestic recession. Banks like Barclays and Lloyds still deal at a significant discount to their pre-referendum levels, while housebuilders such as Persimmon have also fallen thanks to their dependence on a healthy British economy.

Given this broad range of factors, I believe it’s nigh-on impossible to confidently guess where the FTSE 100 will be moving to in the weeks and months ahead.

The post Is the FTSE 100 heading to 7,000? 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?

Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Barclays and HSBC Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Dividend benefit

Shares in BP (LSE: BP) have benefitted massively from the recent fall in the pound, with shares up 20% since the EU referendum on 23 June.

Just like its earnings, BP’s dividends are also declared in dollars, which means its dividends would also benefit from sterling’s recent fall. The improved sterling value of BP’s dividends mean UK investors would effectively get a 12% dividend rise, simply because of the fall in the value of the pound. Although this is a meaningful benefit for UK investors, sterling’s weakness may not persist.

In addition, the pound’s strength also pales in significance when compared to the fall in oil prices. Weaker sterling could add around 12% to the oil major’s 2016 profits, but that still forecasts at less than half of its 2014 levels.

What’s more, BP’s dividends aren’t fully covered by earnings and a dividend cut remains a very real possibility. BP’s dividend futures, which are traded on Eurex, are currently pricing-in an 18% cut in its dividend for 2017.

Cost benefit

UK North Sea oil producers also have an additional benefit from weaker sterling: that is, improved competitiveness. Because a significant share of costs, including wages and a good proportion of equipment and services are paid in local currencies, UK North Sea producers have become relatively more competitive than their global peers.

The oil majors, including BP and Shell, have some big North Sea wells, but overall production from the UK accounts for a very small proportion of their total revenues. Instead, smaller producers, such as Premier Oil (LSE: PMO) and Enquest (LSE: ENQ), which have the bulk of their operations in the UK, stand to benefit more greatly from the improved cost competitiveness of UK North Sea.

Premier Oil is in a particularly good place to benefit from weaker sterling following its recent acquisition of Eon’s North Sea assets back in April this year. But even before this recent deal, both producers generated a majority of revenues from the UK North Sea.

However, a weak pound may be too little too late for these oil producers. Both are quite heavily indebted and what they really need is a substantial rebound in oil prices. Although these companies earn most of their income in dollars, their debt is in the US currency too. So while the weaker pound does help in terms of competitiveness, it doesn’t have an immediate benefit for debt as well.

Neither producer is expected to report a profit for the next two years, which makes it difficult to see whether their stocks are worth buying. The market seems optimistic though. Shares in Premier Oil are up 40% since the start of the year, while Enquest’s shares have gained 61% over the same period.

The post A weak pound is good for BP plc, Premier Oil plc and Enquest plc appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Just how bad could it get for the BP share price?
• BP shares are falling. But is the oil market actually tighter than investors think?
• How much is needed in a Stocks and Shares ISA for £357 of weekly passive income?
• Oil prices are falling. So why am I still bullish on BP shares?

Jack Tang has no position in any shares mentioned. The Motley Fool UK has recommended BP. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

With this in mind, I believe these three growth stocks still have room to run following the Brexit vote.

Huge US dollar exposure

Shares in Shire (LSE: SHP) have already gained 16% this week, but I believe further gains may be in store for the biotech firm.

With demand significantly higher outside of the UK for the kind of expensive therapies that Shire develops to treat rare and speciality diseases, Shire earns over 95% of its earnings outside the UK, with almost three-quarters coming from the US alone. This exposes the company to the substantial fall in the pound this week, particularly against the dollar, which has gained 12% in value against sterling since the referendum.

Underlying fundamentals for Shire are attractive too. With a strong pipeline of new treatments for rare diseases, city analysts expect Shire to report robust earnings growth over the next two years. Even before we adjust for the fall in the value of sterling, underlying EPS was forecast to grow 90% this year, to £2.94. This gives shares in Shire a very tempting forward P/E of 13.5, which is exceptional value for the sector.

Impressive margins

Like Shire, over 90% of Smith & Nephew’s (LSE: SN) revenues come from outside of the UK. The medical equipment manufacturer is a market leader in endoscopy, artificial hips and advanced treatments of difficult wounds, and its competitive advantage is demonstrated by its impressive 14% operating margins.

With a forecast 5% increase in earnings this year, Smith & Nephew’s shares trade at a forward PE of 18.1. Although not necessarily cheap, its shares are reasonably priced for the company given its wide economic moat.

The shares currently offers a modest dividend yield of 2%. But, given that the payout is covered nearly three times by earnings, there’s plenty of room for dividend growth further down the line.

Dividend growth potential

Coca Cola HBC (LSE: CCH) stands out because of its massive dividend growth potential. The Coca-Cola bottling company operates across eurozone and Eastern European markets, and reports its earnings in euros, which means it too stands to benefit from the falling value of sterling. But on top of this, demand for its products is rather non-cyclical, which should mean any potential economic slowdown in Europe would have a limited impact on its sales and earnings.

A recent trading update from the company may be cause for optimism. Growth in volumes remains strong in emerging markets, and the effect on earnings has only been offset by adverse currency movements. But, as currencies have moved in the opposite direction, the underlying strong trend in volumes should now lead to improved earnings.

Furthermore, with the company paying out just 46% of its earnings as a dividend, there’s plenty of scope for further increases in shareholder payouts. Shares in Coca Cola HBC currently yield 2.2%, and are forecast to rise to 2.4% this year.

The post 3 growth stocks still worth buying: Shire plc, Smith & Nephew plc and Coca Cola HBC AG appeared first on The Twelfth Magpie.

More reading

• How much is needed in a SIPP to target a weekly retirement income of £282?

Jack Tang has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Soaring gold price

The price of gold rose by 5% today to $1,330 an ounce, its highest level for more than two years, as investors sought refuge in the shiny stuff following the surprise Brexit vote. The precious metal is widely considered to be a safe haven asset, and gold price movements have historically correlated well with risk aversion and market uncertainty.

I’m unsure about where the price will move from here, but I’m confident that the uncertainty is not going away any time soon. Britain’s negotiations to leave the EU and form a new relationship will likely take many years, which should make for a positive outlook for gold prices. It should also mean that gold mining stocks, such as Randgold Resources (LSE: RRS), will be a great defensive play against further volatility in the markets.

In addition to the soaring gold price, the 8% drop in the value of the pound against the dollar following the referendum result creates a double whammy benefit for London-listed gold mining stocks, as the falling exchange rate further compounds the surge in the commodity price. This means, in sterling terms, gold has risen in value by 13% today.

Randgold Resources is a good pick because it benefits from low production costs, which gives it a wide margin of safety. With an average total production cost of around $700 an ounce, its operating margins are as high as 47% with gold prices at their current levels. Its shares rose by an impressive 12% today, and I think further gains are possible, given the uncertain future.

Search for safety

Defensive stocks have fared much better than cyclical ones, as investors rush to safety.

National Grid (LSE: NG) is one of the most defensive stocks on the market, because as a regulated monopoly in the electricity and gas distribution sector, it is largely unaffected by changes in energy demand and volaility in commodity prices.

With a beta of just 0.32, the firm is rather less-cyclical and generates steady free cash flow year after year. This means the stock pays very reliable dividends, which makes it a great investment for income-hungry investors.

What’s more, the firm’s regulated inflation linked revenues means it offers solid protection against inflation – it’s dividends are inflation rated too – with the company promising to increase dividend payments by at least RPI inflation each year “for the foreseeable future”. National Grid currently yields 4.5%, with its shares up 1% today.

Weaker pound

British American Tobacco (LSE: BATS) reports its earnings in sterling, but earns an overwhelming majority of its revenues outside the UK. The 8% decline in the value of the pound will no doubt prove an immediate boost to the sterling translation of its foreign earnings.

A long-time favourite for dividend growth investors, the tobacco giant has a strong track record of delivering robust dividend growth, and has been a reliable growth story in difficult economic circumstances. I’m confident that its outlook will not have changed dramatically following the EU vote, and it seems the market agrees. At the time of writing, shares in British American Tobacco rose 4% to 4,450p.

The post Why are Randgold Resources Limited (+13%), British American Tobacco plc (+4%) & National Grid plc (+1%) bucking the Brexit downtrend? appeared first on The Twelfth Magpie.

More reading

• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?
• Double a state pension thanks to dividend shares? Here’s how it could be done
• Down 15%! Is National Grid’s share price really a bargain right now?
• How much second income am I aiming for with £20,000 in this superb FTSE 100 dividend star?
• 3 British dividend stocks to consider for passive income this summer

Jack Tang has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.