The Strategist

Stocks to buy during the Brexit market crash

06/30/2016 - 15:20

Morgan Stanley investment bank composed a list of US shares that have been unfairly hit by the British decision to leave the EU.

Andreas Poike
Andreas Poike
Announcement of results of the referendum on Great Britain’s exit from the European Union led to a collapse of stock markets around the world on Friday, 24 June. Panic-stricken investors got rid of stocks by transferring funds into defensive assets. In total, global stock markets have lost more than $ 3 trillion during the day.

Some companies have suffered unjustly against the backdrop of increased volatility, says Morgan Stanley in its research report released this week. Nearly three dozen US stocks dropped in value solely because of the situation in the nervous markets. These papers a sure bet, even if they continue to fall in price on the negative expectations regarding Brexit. In the future, their quotes will go up anyway, according to Morgan Stanley. 

"We focused on the stocks that were sold on Friday, 24 June, with the fundamental indicators showing that the market reaction to them was unjustified or excessive. We believe that drop in prices due to the British referendum creates the possibility of buying for each of these papers", - explained the review.

The list includes 28 securities of US companies, among which are large companies from all sectors of the US economy. The European market has almost no influence on most of the companies since their presence there is quite limited. Therefore, the fall of quotations after the UK referendum seems to be a short-term phenomenon, the report says.

Thus, quotes of Alphabet Internet giant, which owns Google search engine, lost about 4%, dropping to $ 685.2 per share, after the British announcement of the referendum results. According to Morgan Stanley, in the long term Alphabet share price could rise to $ 856 per share due to rapid development of the company’s advertising business and strong competitive advantages of Google. Obviously, Google’s business is unlikely to be seriously affected by the election results in the United Kingdom.

The investment bank voiced similar assessment for online hypermarket and Apple gadgets manufacturer, which shares fell on Friday by 4.2% and 2.8% - to $ 699 and $ 93.4, respectively. According to Morgan Stanley’s forecast, in the future Amazon securities may rise to $ 800 per share, and Apple’s - to $ 120 per share.

The bank is also assured about Italian-American automaker Ferrari, whose shares on Friday tumbled by 7.3% - to $ 40.49. The review states that the company's shares would rise to $ 54 thanks to high volume of net exports beyond the Eurozone. Coffee chain Starbucks is faced with a similar perspective: despite Friday's decline in its stock price by 2.6% - up to $ 54,31, Morgan Stanley expects an increase in its cost to $ 64. The British market is not key for Starbucks since it accounts for only 3% of the corporation’s revenue, and the fall of the British pound would not affect the company’s financial results.