Just a month after the referendum result, and there is little in the figures themselves with which we can gauge its impact on trading; given their domestic focus the effect of this should be more apparent when we start looking at retailers as they report next month. However, a number of UK-focused consumer groups appear to have shrugged off any uncertainty with aplomb – notably fast food groups Just Eat and Domino’s Pizza. As I alluded to last week, the recent success of these businesses can be put down to how well they are navigating long-term changes in consumer behaviour, not least a desire to order over the internet – a trend that is also boosting logistics and packaging groups such as Mondi, Clipper and Smurfit Kappa.
The rapid adoption of online technology – which we discuss on page 11 – also explains why Rightmove is doing so well despite its exposure to property – a segment investors are circumspect about at the moment. Its share price bounced back very quickly from a deep post-referendum fall when it became apparent just how well it’s internet-led model is holding up, while the more traditional approaches of the likes of Countrywide and Foxtons falter.
The kind of consumer equities most in demand, though, are those selling branded products globally such as Diageo, Reckitt Benckiser or British American Tobacco, or drug firms such as AstraZeneca. Insulated from any specific market weakness, the cash will keep rolling in come rain or shine, and that bond-like quality is why their share prices continue to rocket – although I would be careful chasing them higher still. Life has been somewhat tougher for the market’s well represented financial services industry, who if they are not suffering from fears of a UK recession are feeling the genuine effect of low interest rates – no amount of international diversification will be able to shake that off, and it’s a sector I’d be very selective about approaching.
Thankfully, there are plenty of other options on the amazingly diverse UK market. Given the near constant lament that Britain no longer makes anything, it is encouraging to see so many high-quality industrials holding their own in tough markets, helped along by judicious cost control and a focus on cash management. And for those that bemoan our service-led economy, London-listed service groups have been taking the world by storm. Notable among them have been media groups UBM and Tarsus, who have also ridden shifting media trends brilliantly by developing global exhibitions businesses. The same is true of recruiters Impellam and Robert Walters, whose international expansion is underpinning good profit growth, but whose share prices have yet to recover from Brexit-induced anxiety – an anomaly worth further investigation.
