Yesterday, Prime Minister Boris Johnson made a last-ditch attempt to negotiate Britain’s exit from Europe. It remains to be seen how successful he will be. If unsuccessful, a no-deal Brexit is the most likely outcome and this will undoubtedly have a knockdown effect on the UK stock market. But far from running a mile, I think investors should look for buying opportunities.
In his 2018 shareholder letter, Warren Buffett reminded his shareholders that the markets will always be volatile, so the best thing an investor can do is keep a level head and choose stocks carefully.
Gambling is as old as time, as is gold, and as potential investors, we should be seeking to invest in something that can withstand the test of time. I like gold, but I don’t like having to find somewhere to safely store it. Shares, on the other hand, are easy to invest in and don’t require physical space.
Global gamble
I think Paddypower Betfair owner Flutter Entertainment (LSE:FLTR) is one such share that could stand the test of time. It’s been going from strength to strength in recent years and just yesterday announced its plan to buy US giant The Stars Group, owner of Sky Bet, in a $10bn deal.
The shares jumped almost 7% on the news and on any other day it would have probably been a lot more, but this was the worst day for the UK stock market since 2016 thanks to global growth worries.
This acquisition will create the world’s biggest betting group with a market cap around £10.5bn and combined base of 13 million active customers in over 100 international markets.
The gambling industry has been facing increased regulation and higher taxes in recent years. Merging the brands will help cement their position of strength.
Buy low, sell high
Long-term holders of Betfair stock have seen dizzying changes in the past 18 months. I wish I’d bought them back in March 2018 when the shares hit a low of £53.90 only to hit £91.80 two months later. The Flutter Entertainment share price is now sitting at £81.60. There will still be regulatory scrutiny to come, but if the deal goes through, I think this will establish the company globally for many years to come. Flutter Entertainment currently has earnings per share of £2.36 and a dividend yield of 2.6%.
In politically uncertain times such as Brexit, assets such as gold increase their appeal and index funds or bonds are the go-to safe option. If it’s the stock market that interests you then I don’t think you’ll go wrong if you seek out shares in well-established companies with room for growth, a strong trading history and a valuation that has room to grow. Sticking to a few golden rules will help you pick strong shares and don’t forget, when the stock market is down, it’s the perfect opportunity to buy low, sell high.