Perhaps the move for a rapid exit by Britain from the European Union (or Brexit) may have been interrupted due to a political murder of M.P. Jo Cox on Thursday. As this was a member of parliament, perhaps this should be considered an assassination.
Shortly after this horrific act took place, stocks recovered as the shift went to what may be a more thought-out process rather than the constant close polls of whether the United Kingdom will remain in the European Union.
There is no way to cover every single company with big exposure to a “stay” or “leave” vote. Most of the competitors of each of these nations would also fall under the same argument. Either way, we have shown why the 10 companies included here would or would not have exposure to the Brexit vote outcome.
24/7 Wall St. has tracked multiple Brexit forecasts in recent days and weeks. We wanted to focus on might happen to certain sectors if the vote to leave succeeds. There could be some losers here, but interestingly enough a vote to stay might not actually create a massive rally. A lot remains up in the air, and the formal vote might not be the end of this matter as the United Kingdom likely will be changing how it views its inclusion in the European Union regardless of the vote outcome.
A Keefe Bruyette & Woods report shows that the largest so-called universal banks would have the greatest exposure. This puts JPMorgan Chase & Co. (NYSE: JPM) and Goldman Sachs Group Inc. (NYSE: GS), both of which are Dow Jones Industrial Average components, in focus. KBW’s research team warned that these and other universal banks could face a 1% to 6% earnings loss in 2016 and a loss of 2% to 9% to 2017 earnings if the Brexit vote is to leave. Jamie Dimon of JPMorgan already has warned that he would have to reevaluate how the company’s exposure and business is conducted in the United Kingdom and the rest of Europe. Other banks, like Bank of America Corp. (NYSE: BAC), were also singled out as universal banks with big trading and office cost exposure to the Brexit outcome.
24/7 Wall St. earlier identified two potential Brexit winners. One was a move out of financials and into materials via Freeport-McMoRan Inc. (NYSE: FCX). Its shares were already up 60% year to date, but the shedding of other assets and cost cuts may lead to handily trimming of losses. HSBC Holdings PLC (NYSE: HSBC) was another pick, which is rather contrarian and counterintuitive, when you think that financials have the most risk. The rub here is that HSBC has been such a poor performer in recent years and is so close to its post-2008 financial crisis lows that perhaps the Bank of England would have to pump in more liquidity to calm markets. Freeport-McMoRan and HSBC: two opposite sides of the spectrum.
Southwest Airlines Co. (NYSE: LUV) is one of the few airlines not challenging 52-week lows. While this might not rally or tank based on the outcome of the Brexit vote, the reality is that Southwest is viewed as a U.S.-focused operation. Could it be that most of Southwest’s efforts are U.S.-focused, and those outside the U.S. markets are in Latin America and the Caribbean? Southwest shares were last seen at $40.00, more or less close to the mid-point of its $31.36 to $51.34 range over the past 52 weeks. United Continental and American are both dangerously close to 52-week lows, and they have much more tied to international operations in Europe.
AstraZeneca PLC (NYSE: AZN), one of the largest pharmaceutical and biologics companies in the world, is an amalgamated company that has been merged and merged in the past 20 years or so. Its London headquarters comes with operations in over 100 nations. A lot of those sales of course come from the European Union and the United States, so it would be easy to assume that the drug giant could face some serious lumpiness when you consider that the British pound has so much potential fluctuation.
Another facing the most exposure to a Brexit turmoil is Barclays PLC (NYSE: BCS). At least that is according to a Jefferies analyst who said that a leave vote in Brexit would hurt the stock the most, with its ties to the currency moves of the pound. Investors need to keep in mind that Barclays’ American depositary shares are already down 50% from the 52-week high, and the $9.50 share price compares to what has been an $8.00 to $9.00 floor over the past five years.