As voters in the United Kingdom head to the polls today, it's time to reflect on a column of mine from last year. The symmetry is apparent, as today's election is being contested on many of the same issues as the Brexit referendum of June 23, 2016.
Brexit Friday seems like a blur to me, mainly because I pulled my first all-nighter since college, appeared on television and tried to keep investors from dumping British stocks. That nearly yearlong trade has proven to be a lucrative one and I detail the performance of my three recommended stocks in the paragraphs below.
The key to any trade, of course, is knowing when to sell. I've been selling my British stocks this week.
I am not overly concerned about the prospect of an upset victory for Labour in today's election. If I were, I would be shorting British stocks, not going to a neutral position. I lived and worked in the U.K. for five years and I found the British to be quite sensible. Sensible enough to reject the failed socialist policies put forth by Jeremy Corbyn's Labour Party and aware enough to realize that his steadfast opposition to any sort of proactive measures to fight the wave of jihadist terror that again struck Britain this week is reckless and unwise. To put it bluntly, Corbyn is a moron, and the Brits I know don't vote for morons.
So, if I believe Theresa May and her Conservatives are going to win, why am I selling my British stocks? The trade worked and it's time to move on. I believe equities around the world are overvalued and I am reducing my exposure to all major markets. Also, the "juice" in the Brexit trade was the weakening of the pound -- which makes returns in dollar terms all the better -- and I believe sterling will appreciate back into the 1.30s once this election mania has ended.
You may have forgotten this in the one-way exuberance of the Trump Jump, but profit-taking is actually a wise investing strategy.
Also, the possibility that Labour could win -- however remote -- is enough to make me want to avoid the "Katie bar the door" meltdown that I believe would hit British stocks if that occurred.
So, here are the stocks I recommended in the Real Money column I penned in the midst of my bleary-eyed, sleepless reverie on Brexit Friday and their performance since then. The performance figures represent performance of the ADRs, not the London-listed ordinary shares, but again, having exposure to a weakening pound was part of my original rationale for the trade.
Diageo (DEO) : +14.75%
BAE Systems (BAESY) : +32.75%
Rolls-Royce Holdings (RYCEY) : +30.78%
So, it's been a good time to be in British stocks, especially those with aerospace exposure, like BAE and Rolls-Royce. As mentioned previously, though, I believe that trade has run its course. I'll have a new Real Money Best Idea in my column tomorrow that is a U.S.-based, fixed-income name, or as a group of famous Brits once put it, "something completely different."