8 All American Companies Which Could Care Less About Brexit

June 24, 2016 by Jon C. Ogg

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Britain has voted to leave the European Union. They never shared currencies, but they shared in trade and in many common laws and practices. One of the side outcomes of the Brexit vote is that polls are proving to be absolutely worthless. It has been proven time after time that prediction tools just do not get the outcome right. That ‘efficient market theory’ you learned about for investing is also hogwash. This is not going to bring back the trench warfare of WWI but it is certain to keep international risks up as the dust settles.

Companies which have large exposure to Britain and the European Union have some real risks now. Ditto for companies operating outside of the United States now that the currency markets just went haywire.

Keep in mind, this is not a divorce that can happen overnight – we now were given a two-year transition and you know nothing ever happens on the regulatory exercises. This is one of those issues which will eventually come to pass, but locally this can create more headaches than investors might want to handle.

24/7 Wall St. wanted to identify 8 All-American companies with either no direct exposure at all or such low exposure to Britain and Europe that they just do not matter. There are of course other companies out there, but here are eight companies investors can look at with no real exposure to Europe and the U.K.

ALTRIA – STILL SMOKIN’

Altria Group, Inc. (NYSE: MO) used to have massive international exposure. Now its core tobacco business is U.S. focused (Philip Morris International has been spun out). Altria is still smokin’ and if you want proof — its reaction was up by 0.8% and it hit a new high above $67.00 after the Brexit news. its old international counterpart saw shares down almost 3%. That’s proof. So what if the company is killing its customers.

Altria shares were last trading up 1.8% at $67.48, with a 52-week trading range of $47.41 to $67.72.

AMERICAN WATER WORKS – WATER, WATER, WATER

American Water Works Company, Inc. (NYSE: AWK) is a US water utility giant. It used to be owned by the Germans for a bit and it has some exposure in Canada. If anyone can make the case that water utility use by the U.S. public is going to be altered by the Brexit vote, then that person can sell ice to Eskimos in December.

Shares of American Water Works were last up 0.7% at $79.49. The stock has a 52-week trading range of $48.36 to $79.86.

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CHIPOTLE – WHAT STOMACH BUG?

Chipotle Mexican Grill, Inc. (NYSE: CMG) is one company which has had its shares of problems. It also has almost nothing to do with Europe. The corporate description as of the end of 2015 said that it operated 1,971 Chipotle restaurants in the United States. Outside of the U.S.. it had 11 in Canada, 7 in England, 4 in France; and 1 in Germany. So, 12 stores versus 1,971. Even if this alters the growth rate of stores overseas, they will get the currency mess figured out before it matters.

Chipotle shares were recently trading down 0.7% at $406.18, with a 52-week trading of $384.77 to $758.61.

CHARTER – U.S. COUCH POTATO

Charter Communications, Inc. (NASDAQ: CHTR) may feel like a utility to some due to cable, web and voice bundling. The company’s focus is domestic and it is likely not going to be involved in many acquisition deals now that the Time Warner deal is done.

Shares of Charter Communications were last trading down 0.6% at $223.57. The stock has a 52-week trading range of $156.13 to $233.70.

DOLLAR GENERAL – NOT EURO GENERALE!

Dollar General Corp. (NYSE: DG) is the king of the growing dollar store theme in the U.S. It is not even quite in all 50 U.S. states, operating 12,483 stores in 43 states. How many stores does it own named Pound General or Euro General? Oh, and if it gets to buy international goods on the cheap it does even better with more cheap products to sell in the U.S.

Shares of Dollar General were last up 0.3% at $91.96. The stock has a 52-week trading range of $59.75 to $92.39.

POLLO LOCO – NOT EURO-LOCO

El Pollo Loco Holdings, Inc. (NASDAQ: LOCO) has roughly 430 stores in the United States and it has not even come close to finishing a U.S. buildout. This stock may be weak, but it’s hard to pin any of that weakness on Europe or Britain as its stores are all in the United States. Its annual report hardly even has the word international in it at all.

Shares of El Pollo Loco were recently trading down 3.8% at $12.09, with a 52-week trading range of $9.58 to $21.04.

FIVE BELOW – THE OTHER DOLLAR STORE

Five Below, Inc. (NASDAQ: FIVE) may be relatively new and in many ways it competes for the dollar store theme. As of June 20, 2016, it operated approximately 450 stores in 30 states. Its stock was down over 1% with the broader market after the Brexit news, but the reality is that its shares are still challenging 52-week highs. Just like Dollar General, cheaper overseas merchandise is a win for it to buy and sell in the U.S.

Five Below shares were last trading down 1% at $45.85. The stock has a 52-week trading range of $26.95 to $46.50.

PNM RESOURCES – NM/TX ELECTRICITY

PNM Resources, Inc. (NYSE: PNM) is an electric utility with customers only in New Mexico and in Texas. There are of course other utilities that have no exposure, but many people in its markets could financially care less about what is happening with Britain and Europe.

Shares of PNM were recently trading up 0.3% at $33.73, with a 52-week trading range of $24.42 to $34.84.

24/7 Wall St. has tracked several of the knee-jerk reactions from some top brokerage firms and top independent sources with direct quotes. Here are some of the basic Brexit statements made by analysts and economists.

Greg McBride, Bankrate.com’s chief financial analyst: “We had a big relief rally in expectation of a ‘stay’ vote, so hold on to your hats because markets now have to reprice for the outcome. Today will be an ugly day in global financial markets. But since nothing will change right away, a market overreaction presents an attractive buying opportunity.”

BofA Merrill Lynch’s Europe Economic Weekly called it uncharted waters: “Despite indications from opinion polls, the UK has decided to leave the EU. We think that the UK economy will be the main victim, but the shock for the Euro area and global economy will be significant. UK: We expect the economy to quickly enter recession, the BoE to cut rates 50 basis points in July and restart QE potentially in August.”

Dan Kemp of Morningstar Investment Management: “Investors need to keep cool calm heads amid political and financial uncertainty following the Brexit vote.”

World Gold Council: “With Britain voting to exit the European Union, we expect to see strong and sustained inflows into the gold market driven by the staggering level of protracted uncertainty that investors now face… The Bank of England has said that it stands ready to take whatever action is necessary, a mantra that is likely to be repeated by other central banks. In practice, this could mean interest rates move further into negative territory in parts of the world, another positive for gold. Central bank action has already capped the gain in other safe haven assets, with the Swiss National Bank intervening early this morning.”