The Brexit vote hasn’t dented the shares of the three companies I’m looking at today. Far from it. And, after their latest news, are they set to fly, while others flounder, as Brexit runs its course in the coming years?
Silver lining?
Silver miner Fresnillo (LSE: FRES) has rocketed 55% since the referendum, taking year-to-date gains to over 170%. In its interim results this morning, the FTSE 100 giant reaffirmed full-year production guidance of 49m to 51m ounces of silver and 850,000 to 870,000 ounces of gold.
The shares are trading higher at 1,950p, as I’m writing, putting the company on a rich forecast price-to-earnings (P/E) ratio of 60. However, although precious metals prices have risen strongly this year, they’re still well below the boom year of 2011. Consider the following table, showing Fresnillo’s production volumes and average realised prices.
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| Silver production (Moz) | Gold production (koz) | Silver price ($ per oz) | Gold price ($ per oz) | |
| 2011 | 42 | 449 | 34.75 | 1,585 |
| 2016 | 49-51 | 850-870 | 16.58 (H1) | 1,246 (H1) |
Fresnillo’s significantly higher production in 2016 could send its shares a lot higher yet, if prices were to return to 2011 levels. That’s undoubtedly possible in what’s looking a difficult few years ahead for the global economy, but as the company cautioned today, “the sustainability of any rally in gold and silver prices will always remain uncertain”.
A great buy
Blue chip drugs firm Shire (LSE: SHP) closed yesterday at 4,925p — 22% higher than on the day before the referendum result. A number of factors underpin the gain, including the weakness of sterling against the dollar, increased demand for companies in defensive sectors and Shire’s announcement that it’s received US regulatory approval for its dry eye disease treatment Xiidra.
The company announced its Q2 results at noon today, which beat analyst forecasts and sent the shares jumping up to 5,100p. The key takeaway for me is that the transformative Baxalta acquisition (which some analysts had doubts about) is doing even better than Shire expected, with management saying “we are raising our operating cost synergy expectations by 40%”.
Based on upgraded full-year guidance from the company, I calculate the stock is trading at a P/E of less than 16, which, in my view, makes it a great buy.
Relatively low P/E
As of yesterday’s close, shares of A.G. Barr (LSE: BAG) had made a modest 3% gain from the day before the referendum result. However, that gain has been erased following the release of a half-year trading update this morning, with the shares currently at 510p.
The mid-cap owner of IRN-BRU, and other popular brands, including Rubicon, Strathmore and Funkin, reported challenging conditions in the UK soft drinks market in the first half of the year. The company indicated that in order to meet full-year profit expectations, it must assume “market conditions improve and our robust second half plans deliver”.
In addition, the company said that while weaker sterling won’t have a significant impact in 2016, “it is anticipated input costs will increase in 2017,” although it added that this provides management “time to adjust plans accordingly”.
Barr is a well-run business, with a history of delivering long-term value for shareholders. As such, I reckon the depressed stock is worth buying at this testing time on a relatively low P/E (by its own historical standards) of 17.5.
