Friday was a tough day for investors all over the world (unless you are fully invested in gold). There were expectations for BREMAIN, but citizens voted for BREXIT. Equities all around the world plunged and the same is true for my portfolio. As my portfolio is small I can comment on each component what does BREXIT really mean in my opinion for my companies:
Wal-Mart – share price dropped by 0.19% so very small decline. Company is operating mainly in US so business considerations are limited. If we assume that consumer confidence will decline then some shift from more expensive shops to WMT might appear, which in fact might be positive. On the other hand USD as a safe currency should appreciate, which might have a negative translation effect and put some pressure on margins.
Archer Daniels Midland – share price dropped by 5.17%, quite a lot. It is hard for me to predict what the effect might be. The only issue which comes to my mind is that trading division might experience some negative impact (but it can bo both sides, positive or negative).
Apple – share price dropped by 2.81%. Here also I think that the main issue is consumer confidence. Also if we assume that Britain will really leave EU then there might be some more restrictions on selling products in UK (higher tax etc.), but in short term it is highly improbable for me. Stronger USD might have some negative effect due to translation effect. Also maybe there might be some pressure on margins due to appreciation of USD.
Franklin Resources – share price dropped by 7.32%. Well it was another buy which if postponed by few days would bring me some nice discount. Anyway it was highly improbable to predict BREXIT. Decline of different asset classes is obviously negative for BEN as assets under management are declining, results are deteriorating and at the end profits from both fixed and variable fee are declining. But on the other hand valuation is very attractive even is we assume that results are to further deteriorate. When buying shares I didn’t expect an immediate rebound on financial markets all over the world, but also Black Friday is not what I expected…
Finally I think that BREXIT will not be the end of the world. After some spike in uncertainty/volatility I assume that thinks will come back to normal. Even if Britain will decide to exit EU then process will take a long time, so short term implications are not so certain and I think that fear makes thinks look twice as bad as they are. If markets decline further I hope some new buying opportunities will appear, but for now I see most companies still quite expensive to buy.