After the U.K. voted in June to leave the EU, global stocks went into a tailspin—and almost immediately shrugged it off. Even blue-chip U.K. stocks traded at a premium (see chart below), as investors flocked to Britain-based multinationals, which got an added foreign-exchange boost thanks to the weakened pound. That serves as a lesson for investors preparing for further European shocks, such as the increasingly possible “Frexit.” It’s why Jim Ayer has put nearly 20% of his Oppenheimer International Value Fund in France: “The economy is in shambles,” he says. “But the stock market there is made up of tremendous multinational companies.”
His top choice is Pernod Ricard (PDRDY), one of the world’s largest makers and distributors of liquor, whose whiskey brands, including Jameson, are enjoying a global renaissance. Though they’re not cheap, Jamie Doyle, manager of the $6 billion Causeway International Value Fund, likes U.K.-based multinationals such as Royal Dutch Shell (RDS-A) and drugmaker GlaxoSmithKline (GSK). With little of their revenue tied to Britain, they should fare well even if the Brexit process drives the U.K. into recession. Says Doyle: “These are perceived flights to safety.”
Meanwhile, Italy’s referendum this upcoming Sunday threatens—if Italians reject the reform proposals—to set in motion a chain of events that could result in that country leaving the Eurozone. For an Italian company whose stock trades at a discount because of the European upheaval, but which is actually poised for global as well as American growth, see Fiat Chrysler (FCAU) in Fortune’s Investor’s Guide story, “The 21 Best Stocks to Buy for 2017—Before Trump Becomes President.”
Another way to insulate a portfolio from Europe: Buy Japan, “the single biggest beneficiary of a strong dollar,” Ayer says. Ayer favors Sony (SNE), whose U.S.-listed stock offers American investors exposure to its foreign-exchange tailwind without having to worry about hedging the yen (or the future of the Trans-Pacific Partnership trade deal).
PICKS:
Pernod Richard (PDRDY)
Royal Dutch Shell (RDS-A)
GlaxoSmithKline (GSK)
Sony (SNE)
This is part of Fortune’s 2017 Investor’s Guide feature, “The 21 Best Stocks to Buy Before Donald Trump Becomes President.” For the rest of the picks (including two funds) in other sectors, click on the links below:
- The 4 Best Tech Stocks for 2017
- The 5 Best Gold and Energy Stocks for 2017
- The 3 Best Health Care Stocks for 2017
- The 4 Best Financial and Industrial Stocks for 2017
- The 3 Best Emerging Market Picks for 2017
A version of this article appears in the December 15, 2016 issue of Fortune with the headline “Stocks to Keep a Nest Egg Growing.”
