Hobson: Brexit Wiped Out my Stock Gains

THE WEEK: Rodney Hobson's capital gains built up over the past seven years were wiped out by Brexit, although the dividend payments kept him in the black

Rodney Hobson 1 July, 2016 | 12:08PM
Facebook Twitter LinkedIn

Regrets, I’ve had a few but then again, as the song says we haven’t got all night. You make the wrong call, you learn the lesson and you move on.

There’s no point in beating yourself up over what might have been

I have plenty of regrets that I firmly believed Remain would win, and probably comfortably at that. Had I known otherwise, I would have sold all my shares on Thursday and bought back at much lower prices on Friday.

At one point all my capital gains built up over the past seven years were wiped out, although I was still ahead because of all the dividends I have collected in the meantime.

However, there’s no point in beating yourself up over what might have been. The action I took ahead of the Brexit vote was reasonable. I stayed invested in shares but held back a bit of cash just in case I was wrong. I reasoned correctly in an earlier column that any sharp movement in share prices immediately after the result was known would probably be at least partly cancelled out in the following days.

At least I got that bit right with a vengeance. The FTSE 100 index soon recovered all the 500 points lost at the market opening last Friday. Although the more UK-oriented FTSE 250 index of middle sized shares took more of a beating, it too clawed back some of the losses.

 It looks as if this was partly because overseas buyers saw shares as doubly cheap after allowing for the fall in the value of the pound. It may also be because at least now that we know the outcome of the vote we can start planning ahead again, although I still wonder if a pro-Remain House of Commons will pass Brexit legislation.

There will be many uncertainties on the way to Brexit but two things you can be sure of: there will be plenty of buying opportunities and shares will remain the best investment.

Solid Foundations for the Housebuilding Stocks

Apart from banks, the sector showing the biggest falls post-referendum is housebuilders. Not only were shares down around 40% over two days, the bounce back has been more muted than elsewhere.

It is certainly possible to argue that shares of housebuilders had run up too quickly over the past two or three years but the correction has been grossly overdone, as Redrow (RDW) quickly demonstrated with an update alerting the market to the fact that trading is going better than analysts were expecting. There has been no immediate Brexit turndown in demand.

Even if immigration was halted, we still have a shortage of flats and houses. The sector is underpinned for the foreseeable future.

Dixons Carphone Calls in a Higher Dividend

Amid the gnashing of teeth, results from Dixons Carphone (DC.) this week came as a welcome relief. Revenue edged up 5% on a like-for-like basis and underlying profits were 17% ahead for the year to April 30. The final dividend of 6.5p means the total for the year is 15% higher. Free cash flow has more than doubled and debt has been held steady. The Sprint joint venture in the US will soon be bringing in a further revenue boost in US dollars, no bad thing if weakness in the pound continues. Likewise, there are earnings in Scandinavia and Southern Europe in strengthening currencies.

What I liked most, though, was the positive attitude that chief executive Seb James is taking to life after Brexit, looking to build the group where it is already strong and hoping to spot new opportunities.

I was surprised to see the shares fall after such an encouraging update so I decided to stop prevaricating and make this my first post-referendum purchase.

The shares ended last year at 500p and have been sliding to around 325p. I believe they will bottom out soon and recover at least some lost ground before the end of the year.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn

About Author

Rodney Hobson

Rodney Hobson  is a columnist for Morningstar.co.uk and author of several investing books, including The Dividend Investor and How to Build a Share Portfolio.