Investing

13 Large US Companies With Little or No Brexit & Europe Woes

Jon C. Ogg

Published: July 3, 2016 9:31 am

Last Updated: January 13, 2020 6:07 am

OK, so we all know now that Britain voted to leave the European Union. All the polls told you not to worry about that happening, but then it happened. The dollar surged, stocks in Britain and Europe fell hard enough to drag down the U.S. market, and that all adds up to Janet Yellen and the Federal Reserve now likely being unable to raise interest rates like they wanted to. Still, the week of July 1 ended up not being so bad when you consider the recovery that was seen after the first two post-Brexit trading days.

Even by Thursday, the final trading day of the second quarter, the Dow Jones Industrial Average had recovered about 80% of its 900 point drop seen from the two days after the Brexit news broke. Maybe this doesn’t seem normal. Maybe trade deals do not create massive rallies going in, but maybe they create woes and uncertainty on the way out. Perhaps you have heard the saying that there is always a bull market somewhere.

24/7 Wall St. wanted to break out 13 great companies which are very close to being All-American. These are all multi-billion dollar companies which are either industry leaders or which are massive. They should have very little direct cares about what is happening in Britain and Europe other than relative values based upon peer action. The focus is less on current share prices, and investors need to understand that at least some of these have a premium valuation now because they are less exposed to the current woes or because they are defensive by nature.

AT&T Inc. (NYSE: T) isn’t just in wireless and telecom now. It also owns DirecTV and has a focus in the United States and now in Latin America. Earnings were solid and its entertainment and subscription base keeps growing. Merrill Lynch has a Buy rating and recently raised its price objective to $46.00 from $42.00. Investors are paid a solid 4.6% dividend yield and AT&T’s consensus analyst target is $39.67. It is above the consensus target, but it has the highest yield in major telecom carriers and is now deemed to be defensive.

Altria Group Inc. (NYSE: MO) keeps hitting new highs as it is now U.S.-focused for tobacco and related products. Its international segment was spun out long ago, and nobody seems to care that it is killing off its customers (or are they subscribers?). The real issue is that Americans may quit smoking eventually, but it will not have anything to do with Brexit. Altria’s price target was recently raised to $71 from $65 at Stifel. This was at $66.31 ahead of Brexit and was at $68.50 late in the week after Brexit. Its dividend yield is now under 3.4% and its consensus analyst target price is $68.00.

American Electric Power Co. Inc. (NYSE: AEP) is one of the largest electric utilities in the United States. it has more than 5.3 million customers in 11 states and is a key defensive stock that has risen as yield hungry investors have pushed up utility prices. AEP shareholders are paid a solid 3.3% dividend yield. Merrill Lynch’s price objective is $68.00, and the consensus is at $68.18. Shares were last seen trading above $69.00 and the emphasis here is that rates will be lower for longer.

American Water Works Co. Inc. (NYSE: AWK) is America’s largest public and independent water utilities operator. It has some Canada exposure, but it covers millions of Americans and keeps making small bolt-on acquisitions of water systems. Can anyone think that Brexit fears will eliminate or lower America’s daily water use? Shares hit yet another all-time high above $83.00. American Water Works has a low yield of 1.7%, but that is because the stock has surged and investors are paying a major premium to own water. This stock price is now over $10.00 higher than the consensus analyst price target, and analysts keep warning that valuations are unjustified — yet the stock has kept surging higher.

CBS Corp, (NYSE: CBS) was named as one of three value stock picks recently by Jefferies. The media giant is more U.S. focused than anything. Its news, sports and entertainment franchises should insulate the threat of Brexit for Americans. After all, how many Americans will watch less TV just because of Brexit? Wall Street expects CBS to shrink its share float by close to 25% over the next two years. Despite a decline in cable subscribers, Jefferies thinks that CBS will win as retransmission rates should climb and offset the subscriber declines. CBS shareholders are paid a 1.11% dividend yield, and Jefferies has a $62.00 price target. That is versus a consensus analyst price target of $63.00 and versus a recent $53.50 share price.

Chipotle Mexican Grill Inc. (NYSE: CMG) has not been immune to problems at all. Making your customers sick on food-borne contamination is not good. Still, it is recovering and most companies recover from these sorts of issues. As of now, Chipotle has almost nothing to do with Europe. At the end of 2015 it operated 1,971 Chipotle restaurants in the United States. Outside of the United States, it had 11 in Canada, seven in England, four in France and one in Germany. Sorry, but 12 stores versus 1,971 is a non-event — and Brits and Europeans wanting a burrito may not stop just because of the Brexit. Even if this alters the growth rate of stores overseas, the Brits and Europeans will get the currency mess figured out before it matters. Chipotle shares were recently trading at $403.00. Its consensus analyst target is almost $460 and its 52-week trading is $384.77 to $758.61.

Charter Communications Inc. (NASDAQ: CHTR) may feel like a utility to some investors due to cable, web and voice bundling. The company’s focus is domestic and it is likely not going to be involved in many acquisition deals now that the Time Warner deal is done. Its balance sheet may be leveraged with debt, but the $61 billion market cap has grown in 2016 due to millions of subscribers. Shares of Charter Communications were trading at $227.00 late in the week versus a 52-week trading range of $156.13 to $233.70.

Dollar General Corp. (NYSE: DG) is no longer just $1.00 and under in products, but it is effectively all U.S.-based retailing. After all, it has no stores named Euro-General. They are now reaching up and taking business from Walmart, and a stronger dollar helps them buy more goods on the cheap that it can sell in the sub-$10 retail category. Dollar General shares have risen since Brexit broke, and shares went above $94.00 in the week of July 1. Dollar General is new to the dividend game, but its 1.1% dividend yield has ample room to grow in the years ahead. Its consensus analyst price target is now nearing $100.00 as analysts are continuing to chase it up.

Government Properties Income Trust (NYSE: GOV) has been recovering as a REIT with rates being lower for longer. It caters mostly to federal, state and local government and quasi-governmental agencies. It turns out that the government just won’t shrink and they tend to keep very long leases that last for years and years. A week ago this was at $20.50, but it was back above $22.50 late this week. It still has an 8% dividend yield. Would you like to loan Uncle Sam money by buying Treasury notes at less than 1.5% for a decade, or would you like to make 8% by playing the government’s landlord.

Healthcare Realty Trust Inc. (NYSE: HR) is a $3.6 billion REIT, benefiting from the lower rates for longer theme. Its shares were recently challenging new highs of close to $35.00, but its yield is only about 3.5%. It is diversified within operating and owning  health care services properties. Will people in the U.S. need less healthcare because of Brexit? Analysts have a consensus price target that is lower at $31.22, but the highest target price is $37.00. It even recently sold $268 million or so in stock to pay debt, and it hardly had an impact on the stock.

Kroger Co. (NYSE: KR) is both defensive and necessary. You can buy food of all sorts, cheap or expensive – even getting some of the exact same products that Whole Foods sells at a handy discount. On top of Kroger stores, it has stores under name Ralphs, Fred Meyer, King Soopers, and it has its own branded foods. Kroger shareholders are paid a 1.3% dividend yield. The Merrill Lynch price objective is $45.00, and the consensus is at $41.50. Kroger shares were last seen at $36.50 versus a $42.75 high over the last year.

Senior Housing Properties Trust (NYSE: SNH) recently hit a 52-week high that was north of $21.00 this last week. It still yields 7.7%. This REIT out-yields most senior housing REITs, but that may be because it has diversified into other medical-oriented facilities in recent years. Senior Housing Properties was under $20.00 before the Brexit news and was under $19.00 at the start of June.

Southwest Airlines Inc. (NYSE: LUV) may have been hit hard with airlines and transports of late, but its international footprint is both small and very new – flying just to a few destinations in the Caribbean and Latin America. It is also now the nation’s largest carrier in terms of originating domestic passengers boarded. Southwest shareholders are paid a 1.07% dividend and it is shareholder and labor-friendly alike. Merrill Lynch’s price objective is $56.00, while the consensus is lower at $53.82. Southwest shares were last seen trading at $38.90.

If you want to know why there are no gold stocks included here, it is because almost all of them rose handily.