Merryn's Blog

What to buy if Scotland votes Yes

Anything connected with Scotland will drop in price if voters choose Yes, says Merryn Somerset Webb. That could present investors with a buying opportunity.

Which listed companies would be most hit by a Yes vote in Scotland on Thursday? We looked at some in our cover story last week (now free to read), but since then, various brokers have added their views to the mix.

Citi reckons you might want to avoid Aberdeen Asset Management on the basis that it could lose clients domiciled outside Scotland as well as being hit by sharp rises in regulatory costs.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

However, the broker considers Babcock to be the highest risk firm in the market: 15% of its revenues come from its Rosyth and Clyde shipyards.

Then there are the oil companies: Jim Sillar's threats to push for nationalisation post a Yes vote isn't the kind of thing that makes shareholders feel secure in a future stream of dividends from the North Sea. There will, he said, "be a day of reckoning with BP and the banks."

Advertisement
Advertisement - Article continues below

But it might not be just companies clearly operating in Scotland that are hit by all the nonsense in the north. The fact is, says John Redwood in the FT, the UK is "entering a very political period".

Investors are also likely to be beginning to take into account the high chance of a Labour government winning the next election. That means "high property taxes; a price freeze for utilities; intervention in banking; and a general wish to tighten up on large companies and their behaviour."

These are all things that "will be seen as a headwind against profits and dividends". Add the referendum to that and you begin to see why there has been such huge capital flight from the UK in recent weeks (£27bn in August alone and the numbers must have picked up in September): it just doesn't feel like a safe haven anymore. Redwood would cut back on all UK holdings.

On the plus side, there might be a few opportunities waiting in the wings for investment trust fans looking to pick up some assets for less than their net value.

If you are really expecting a Yes vote (and, insane as you might think it, it really does seem to be 50:50 at the moment), you might make a list of the Scottish-based trusts you'd really like to own and keep it for Friday.

If there is a Yes vote, it seems likely that anything remotely connected with Scotland will see a drop in price. But given that the trusts are mostly invested in global assets of one kind or another; are listed in London; and can easily shift their domicile south (at a cost of course), any correction is likely to be temporary, or as the financial industry likes to put it, 'a buying opportunity'.

Advertisement
Advertisement - Article continues below

Personal Assets and Scottish Mortgage both of which are in our investment trust portfolioare based in Edinburgh.

If you already hold trusts and are happy with them (as we are with ours), however, don't sell them in hope you can buy them back for less later: long-term investors don't trade on noise.

Advertisement

Recommended

Visit/investments/funds/investment-trusts/600757/why-investment-trusts-are-the-best-vehicle-for-your
Sponsored

Why investment trusts are the best vehicle for your money

Max King explains the advantages of investment trusts – sometimes called closed-ended funds – over their open-ended counterparts (or Oeics).
11 Feb 2020
Visit/520115/investment-trusts-the-cinderella-of-investment-arrives-at-the-ball
Funds

Investment trusts: the Cinderella of investment arrives at the ball

Investors should look beyond the market noise of a single year and examine the bigger picture. Max King explains what we can learn from 25 years of in…
8 Jan 2020
Visit/511175/seven-investment-trusts-to-make-your-investments-go-global
Stock markets

Seven investment trusts to make your investments go global

The outlook for equities remains encouraging. An investment trust with an international remit will help you profit.
23 Jul 2019
Visit/509793/give-these-investment-trusts-a-chance
Share tips

Give these 19 investment trusts a chance

Investors should spare a thought for these 19 out-of-favour investment trusts, says David Stevenson.
2 Jul 2019

Most Popular

Visit/investments/stocks-and-shares/600863/sirius-minerals-anglo-american-takeover
Stocks and shares

Do you own shares in Sirius Minerals? Here’s what you need to do now

Mining giant Anglo American has proposed a cash takeover of Yorkshire-based minnow Sirius Minerals. Unhappy shareholders must decide whether to accept…
20 Feb 2020
Visit/currencies/600842/eur-usd-euro-slide-against-us-dollar
Currencies

The euro’s slide against the US dollar looks set to continue

The euro has been in a bear market against the US dollar for two years now. And on a broader scale since 2008. A decline like that is telling us somet…
19 Feb 2020
Visit/economy/uk-economy/600862/britains-economy-might-spring-a-surprise-on-the-doomsayers-this-year
UK Economy

Britain’s economy might spring a surprise on the doomsayers this year

The UK economy is looking pretty good – we’re more at risk of a boom than a bust, says John Stepek. Here’s why, and what it means for your portfolio.
20 Feb 2020
Visit/investments/stockmarkets/european-stockmarkets/600725/is-2020-the-year-for-european-small-cap
Sponsored

Is 2020 the year for European small-cap stocks?

SPONSORED CONTENT - Ollie Beckett, manager of the TR European Growth Trust, on why he believes European small-cap stocks are performing well.
12 Feb 2019