It’s a great day to be a bull as all three indexes are substantially higher. The Dow Jones Index has rallied by over 250 points, the S&P 500 is close to 2,100, and the NASDAQ is up by 1.5%.
As the latest polls suggested that UK will most likely remain in the European Union, most markets around the world rallied. In this article, we take a closer look at some NYSE-listed companies that are headquartered in the UK, including BT Group plc (ADR) (NYSE:BT), Barclays PLC (ADR) (NYSE:BCS), Royal Bank of Scotland Group PLC (NYSE:RBS), InterContinental Hotels Group PLC (ADR) (NYSE:IHG), and British American Tobacco PLC (ADR) (NYSEMKT:BTI), all of which are trading higher today. Let’s take a closer look at the latest developments that pushed these stocks higher and see how smart money investors are positioned towards them.
While there are many metrics that investors can assess in the investment process, the hedge fund sentiment is something that is often overlooked. However, hedge funds and other institutional investors allocate significant resources while making their bets and their long-term focus makes them the perfect investors to emulate. This is supported by our research, which determined that following the small-cap stocks that hedge funds are collectively bullish on can help a smaller investor to beat the S&P 500 by around 95 basis points per month (see the details here).
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Brexit Sentiment Change Sends UK-registered Companies Higher
BT Group plc (ADR) (NYSE:BT), InterContinental Hotels Group PLC (ADR) (NYSE:IHG), and British American Tobacco PLC (ADR) (NYSEMKT:BTI) are up after several polls showed more British citizens favoring remaining in the EU than leaving. According to a Survation opinion poll made for the Mail on Sunday, 45% of the people surveyed favored remaining, while 42% were in favor of a Brexit. Two polls by other organizations also show similar results, albeit with the ‘remain’ side sporting a narrow margin of victory, compared to ‘leave’.
The market originally sold off last week due to concerns that a ‘Brexit’ might cause the European economy to slide into recession and the dollar to strengthen. Several polls showed the ‘leave’ side gaining strength and widening its lead over the ‘remain’ side. The fears over Britain leaving the EU were attenuated however, after the death of a British pro-EU politician, Jo Cox. Cox, who was killed by a 52 year-old pro-Brexit man who had ties to far-right organizations. The death of Cox caused sentiment for remaining in the EU to strengthen inside Britain. Adding to the ‘Bremain’ vote is the fact that many British citizens became more cognizant of the economic consequences of Britain leaving. Because the indexes sold off so sharply, many citizens realized the negative potential impact of a ‘Brexit’ and changed their negative stances.
Of the three stocks mentioned, British American Tobacco PLC (ADR) (NYSEMKT:BTI) was the most popular in our database with 14 funds holding shares at the end of March. BT Group plc (ADR) (NYSE:BT) was next with 11 funds and InterContinental Hotels Group PLC (ADR) (NYSE:IHG) was last with jusr four funds owning shares as of the most recent 13-F reporting period.
On the next page, we examine Barclays and Royal Bank of Scotland Group PLC.
Waning Brexit Fears Fuel Bank Rally
Not to be left out, UK-headquartered banks, Barclays PLC (ADR) (NYSE: BCS), and Royal Bank of Scotland Group PLC (NYSE:RBS) are also each up today on the back of the sentiment change. Banks with substantial British or European exposure have more to lose than American banks in the event that Britain leaves the EU. The shock of Britain leaving could cause black swan events that freeze credit or decrease liquidity in essential markets. They could cause a recession that leads to more write-downs and lower profits. If Britain stays inside the EU, there is more certainty and the banks’ future profits are more visible.
Among the funds we track, 12 funds owned $289.27 million worth of Barclays PLC (ADR) (NYSE:BCS)’s stock, which accounted for 0.80% of the float on March 31, versus 12 funds and $275.4 million, respectively, a quarter earlier. At the same time, 10 funds amassed $32.88 million worth of Royal Bank of Scotland Group PLC (NYSE:RBS)’s shares, which represented just 0.10% of the float at the end of the first quarter, versus eight funds and $16.99 million, respectively, at the end of the fourth quarter.
Disclosure: none
