Stockwatch: Hot spots to watch in Brexit tumult

So Brexit is a reality, enough of the British public resolved to snub Jean-Claude Juncker's asserting no further renegotiation of Britain's relationship with the European Union (EU). How he, Donald Tusk and Angela Merkel must be ruing that they did not help their natural ally David Cameron further.

The likelihood is of longer-term fragmentation of the EU as demand for continental referendums will grow. It's a sudden, big black swan for complacent markets to adjust to, but like any financial panic opportunities will arising in both the short and longer term, so keep a cool head.

Amid likely tumultuous markets today it's impossible to tell you what pricing opportunities will arise - and may be transitory - but worth bearing some tactics in mind. International earners are an obvious theme for fresh money, given sterling weakness, and tobacco stocks such as British American Tobacco and Imperial Brands are likely to attract defensive interest - also for 4%+ yields in support. That's taking a capital protection stance, also to flee sterling cash reserves if you hold.

The dilemma is potential mark-downs being less than hoped-for as the trading day takes shape, such that banks, housebuilders and importers such as car traders end up offering better short-term value because the market savages them excessively for risk.

So as a first matter, be aware of your aims if trading at all in the days and weeks ahead. Are you trying to better protect your portfolio and reserves, or be opportunistic in search of value?

Gold to attract interest

Gold is likely to attract further interest as a hedge against risk, implying a better operational gearing factor for mining companies; so these stocks are worth eyeing.

I've previously drawn attention to Centamin as a mid-250 play that is lower-risk than gold mining juniors lacking an established financial record, and is also on a relatively modest forward price/earnings (PE) multiple in the mid-teens -compared, say, with Randgold Resources  on about 30 times.

Centamin's chairman may come to regret he just recently sold 5 million shares at 111p, albeit retaining nearly 53 million, which clipped the price to 105p.

Again, you are going to have to see what the daily volatility brings; it's hard to be specific when markets are fast-moving amid seismic political change. But all this favours medium-term attractions in gold, despite profit-taking lately.

Banks a tricky area

Bank stocks are a tricky area perhaps best left to short-term/day traders, given it's presently hard to quantify the medium-term effect of Brexit on their operations - what restructurings could cost - and considering PE multiples have recently looked pretty fair.

Lloyds Banking Group has offered a prospective yield of 7% covered about 1.5 times by forecast earnings, so if those forecasts are at all realistic then Lloyds could get bought on weakness; similarly HSBC Holdings offers 8% (though with lower forecast cover at only 1.3 times) and the bulk of its revenues derived from Asia, therefore a useful hedge against sterling.

Standard Chartered I would exercise care towards given its Chinese exposure - where risks persist - and a sub-3% yield is not enough compensation for holding risk. I wouldn't be a sudden enthusiast for bank stocks as they are a touchstone for financial risk generally, and fears of a systemic crisis may return, so from a medium-term investing angle "better to watch".

Housebuilders in the eye of the storm

House-builders are also in the eye of the storm, given Brexit has been well-mooted as liable to stall the market; and the extent of mortgage subsidy come into question if the chancellor - especially any replacement to George Osborne - has to reconsider Help to Buy.

But the Bank of England is unlikely to raise interest rates for anything other than a short-term measure, if absolutely necessary in sterling's defence, and immigration is not suddenly going to halt. So medium-term demand for homes, including more in the rented sector, will continue. I would not therefore pull my positive stance just lately on Crest Nicholson.

If you are substantially invested in equities already, ride out this mark-down. The Bank of England has already has already just declared it "has undertaken extensive contingency planning and is working closely with HM Treasury, other domestic authorities and overseas central banks" - i.e. they will continue to backstop markets as best they can.

Professional investors have come to respect this, hence "buy the dip" remains a valid strategy; it's doubtful long-term institutions will be dumping stocks, only leveraged speculators.

Certainly the short- to medium-term risk premium has risen on UK companies as a result of Brexit, which argues for higher dividend yields, hence lower prices. But lower sterling is just what exporters need, and the nimble ones will thrive, plenty opportunities will arise as the dust settles.

A financial panic is always heaven-sent for investors, if you can hold your head.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser