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Brexit fears? Buy dollars, builders and Vodafone

David Kempton has moved his cash into dollars and invested in house builders and Vodafone as he looks for stocks immune to Brexit worries.

 
Brexit fears? Buy dollars, builders and Vodafone

Writing this now in Cape Town, I am unswayed by opinions this morning from friends and colleagues; so far today I’ve spoken only to locals who are unlikely to have even heard of Brexit.

Hence my uncorrupted view remains, unhelpfully, powerfully sitting on the fence. My heart says ‘out’, my head says ‘in’ and I suspect that view is not unusual. 

An early morning electronic skim of the UK press tells me that 60% of both the Institute of Directors and manufacturing trade body the EEF will vote to stay in the European Union. Clearly these will be informed opinions of people voting as befits their businesses and their jobs. 

Nevertheless, they only get one vote each, just like the population at large, who may not give the issue quite the same consideration, whilst their vote counts just the same. Referendums are tricky to predict – hard for the pollsters too, since it’s impossible to forecast how many will turn out to vote.

We are going to be drowned in media attention over the next four months until 23 June and I suspect the electorate are going to get pretty bored by it all, just like every long lead in to any election. No matter, at the end of the day, we should all vote based on how we consider it affects our jobs, inflation and prices. 

We will hear many arguments for the damaging effects of negotiating a myriad of trade agreements, all negated if we leave the EU, and the impact on the defence of our small island from external wars and the constant fear of the enemy within. 

Boris boost for Brexit

The news that Boris Johnson will lobby for an exit is very significant for the ‘no’ campaign. Is it a play for the leadership? Almost certainly, having recently refused various senior roles in the government, it would look that way.

I think Michael Gove will be very important to the exit campaign too. He’s been out of the limelight recently, but I sat next to him at dinner before the election and was very impressed with his charm, intellect and instant grasp of all matters. We will hear a lot from him too in the next weeks and he’s a powerful orator.

Meanwhile, what of Scotland? First minister Nicola Sturgeon makes it clear that Scotland would stay in the EU should Britain vote to exit. Thus we could face another Scottish independence vote. It could be a daunting year for the voters but potentially historic for Britain.

Put cash in dollars

So what does an investor make of all these influences over the next weeks, as polls swing one way and another? Markets hate uncertainty, so we are likely to see a weak sterling; renowned pundits talk of a 20% hit in the event of an exit vote. I put my cash in dollars a while ago and would suggest it’s not too late to do that still.

The FTSE 100 will be undeterred, since 80% of it is international anyway (17% Europe ex UK) largely unaffected by local UK issues. But what will overseas investors make of it? Will major fund managers change their UK allocations?

I have been at the Mining Indaba conference in Cape Town, a low-key affair again this year compared to the jamboree of recent years when mining stocks were flying, but now still giving the impression of an industry in hibernation. I come home with strong views on where the sector goes from here, but this for another time.

I bought three stocks: a gold miner, a potash producer, both risky speculative small purchases, but also a good unit in Vodafone (VOD).

Vodafone a good call

Vodafone is not without risk, considering India’s threat to seize all local assets unless the company pays £2.1 billion. An odd demand considering Prime Minister Modi’s statement earlier this month about stopping hounding companies for retrospective tax. 

In a remote village in Zambia last week I saw a virtual cashless society working highly efficiently. Some payments by barter (we can’t replicate this easily) but most general payments made by mobile phone – and we will replicate that. 

The developed world is only just starting to pay by mobile phone, but in perhaps three years it will be the norm, certainly for the younger generation. Vodafone is very good at this all over the world. It seems strange that remote villagers all over Africa lead the way.

A Brexit vote has little relevance to Vodafone with only 11% of revenues in the UK (with 10% from India). Meanwhile relax with a 5% yield and await the growth and resolution of the issues which seem to hold back the share price.

I enjoyed ‘my’ MJ Gleeson (GLEG) results yesterday. Profits 130% higher, divided raised by two-thirds and their strategy of low land price, low sales price (but gross margin 31%) is aimed at starter home couples on a living wage. Buy more and ignore Brexit, it’s irrelevant here, whilst Bovis (BVS) results, also yesterday, illustrate the strength of the sector.

So back to Brexit and having said all the above, I fear that if the vote was tomorrow, I would follow my head, not my heart, and vote to stay in, being the ‘wimpish’ safer option. That might seem unadventurous but the whole EU party might just break up anyway soon. To paraphrase Boris, ‘an old analogue solution for the new digital society’ won’t work any more.

David Kempton is an experienced investor, proprietor of Kempton Holdings and a non-executive director of a number of quoted and private companies. He may have an interest in any of the investments which he writes about.

29 comments so far. Why not have your say?

Anonymous 1 needed this 'off the record'

Feb 23, 2016 at 13:35

Problem with Boris is "blonds are always more fun", but apart from incredibly ambitious streak , observing him for years here in London. there is more IQ and solid application and solid work with Cameron (both Eaton /Oxford)

Boris is not going to lead anything, he will always play to gallery , charming and amusing as this play is , he could not even explain Sovereignty to MP's in yesterday''s Commons debate.

Went for builders and will try to survive upheaval with them.

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Denis Parkinson

Feb 23, 2016 at 13:58

Problem with David Cameron is you can not trust him, this is the man who promised to bring net immigration down to the "tens of thousands", his judgement is definitely suspect, just listen to his scaremongering over Brexit.

As for house builders have Bovis but down 7 or 8 per cent.

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Anonymous 2 needed this 'off the record'

Feb 23, 2016 at 14:07

Not so sure about the builders, especially those focussed on London and the South East. In the run up to the vote, and post-Brexit it seems to me that the ultra-rich foreigners buying investment properties (and pushing up prices) will desert London and the SE. I do think there is currently a bubble in London prices.

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Luichicornish

Feb 23, 2016 at 14:31

Dying to see the United Kingdom out of the Dictatorial EU.

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Brian Martin

Feb 23, 2016 at 15:09

We need EU for security, Mr Cameron??

Sorry but I think it is the other way round, and still will be when we get back to being the best country in the world without the EU`s hand in our back pocket.

The bankers are going to squeal but perhaps this what it needs to make them realise that millions of pounds salary a year, could get less and they would still survive. Try just getting by on a state pension!

We survived in the past and we will again BECAUSE WE ARE BRITISH and if given the right motive and leadership.

Brian Martin

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Anonymous 1 needed this 'off the record'

Feb 23, 2016 at 15:18

What the hell do you know about "dictatorial EU". You survive on political spinets.

EU is a combination of elected and appointed by UK government.

Yes, there is a bubble in LOndon prices,

supply/demand,

but still not enough build ( for mortals) as THRERE IS A SHORTAGE OF LABOUR.

NO bricklayers, electricians ect ect Germany pays better but they started now to look for skilled refugees YES!!!!

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Anonymous 3 needed this 'off the record'

Feb 24, 2016 at 12:31

1.My heart says ‘out’, my head says ‘in’ and I suspect that view is not unusual. MMMM!

HEART SHOULD BE IN: ARE YOU A GOOD EUROPEAN? HEAD SHOULD BE OUT: REMAIN IS A LEAP INTO THE DARK WHEN EUROPE HAS TAKEN SO MANY WRONG TURNS AND IS ROTTEN TO THE CORE AND INCOMPETENT.

2.60% of both the Institute of Directors and manufacturing trade body the EEF will vote to stay. Clearly these will be informed opinions of people voting as befits their businesses and their jobs.

NOT “CLEARLY” AT ALL AND NOT “INFORMED”: JUST SHEEP HERDED/THREATENED BY CAMERON. “THEIR JOBS”- THEIR OWN MAYBE - BUT THEIR WORKERS?TOO LAZY TO SEIZE THE OPPORTUNITIES OFFERED BY FREEDOM FROM THE EU.

3.we should all vote based on how we consider it affects our jobs, inflation and prices.

WE SHOULD ABSOLUTELY NOT! AND HOW DO WE KNOW ANYWAY.

THERE ARE OTHER MUCH MORE IMPORTANT CONSIDERATIONS.

4. damaging effects of negotiating a myriad of trade agreements, all negated if we leave the EU… impact on the defence of our small island from external wars and the constant fear of the enemy within.

WE WOULD HAVE THE FREEDOM TO NEGOTIATE WITH WHOMSOEVER WE WISHED. NOBODY IS ADVOCATING LEAVING NATO.THE “ENEMY WITHIN” WOULD BE IMPORTED FROM WITHOUT (i.e FROM THE EU) IF WE STAYED IN.

5.Boris Johnson will lobby for an exit … Is it a play for the leadership? Almost certainly

NOT SO: BORIS IS LOOKING AT POLITICAL DEATH IF THE VOTE IS TO STAY. HE HAS A RESPECTABLE ANTI-EU RECORD- NOT A JOHNNY COME LATELY. HE’S A HUGELY INTELLIGENT MAN AND IT SHOWS; HE MAKES CAMERON LOOK STUPID.

6.Michael Gove will be very important to the exit campaign

INDEED: A PRINCIPLED AND INTELLIGENT MAN

GOOD THAT HE IS ONSIDE IN THE LEAVE CAMPAIGN.ONE ALWAYS HAS RESPECT FOR THOSE WHO THINK FOR THEMSELVES AND DON’T TOE THE PARTY LINE FOR THE SAKE OF THEIR CAREER.

7.Nicola Sturgeon makes it clear that Scotland would stay in the EU should Britain vote to exit. PITY SCOTLAND DIDN’T VOTE TO LEAVE THE UK. THERE WILL NOW BE TOO MANY SCOTS MISTAKENLY OBEYING NICOLA.

DO THEY THINK THEY COULD STAY IN THE EU ON A LEAVE VOTE?NO, ACTUALLY.

8.weak sterling;

IF YOU WERE AN EXPORTER YOU’D BE RUBBING YOU HANDS WITH GLEE.

A Brexit vote has little relevance to Vodafone

WEAK STERLING PRESUMABLY GOOD FOR VODAFONE AND IF A BREXIT VOTE HAS LITTLE RELEVANCE FOR IT WHY ARE THEY ALLOWING THEMSELVES TO BE ROUNDED UP TO JOIN THE CAMERON CAMPAIGN?

9.vote to stay in, being the … safer option…. whole EU party might just break up anyway soon.

“THE SAFER OPTION”? AU CONTRAIRE.

“EU PARTY MIGHT BREAK UP”: SURE- BUT DO WE WANT TO GO DOWN WITH THE TITANIC?

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Hotrod

Feb 24, 2016 at 16:18

One thing is for certain: The western world will be a very different place in twelve months time. Old allegiances, and the status quo are crumbling.

Donald Trump, and Nigel Farage are saying things which need to be said, uncomfortable and painful though it is to listen to their arguments.

As regards the defense issue: Winston Churchill famously said: If it depended on European support Great Britain would always choose the open sea. He was of course not to know of the the close collaboration we have established since. Vis: Eurofighter and Aircraft Carrier deployment, not to mention American cruise missile and Awax systems, but I believe the basic principle holds true. We would be stronger making our own strategic defense decisions. Our European and American partners are not going to desert us because of realistic political change.

It seems abundantly clear to me that the increasing threat of an overwhelming invasion by economic, illiterate, migrant hordes will out-weigh the advantages of a larger pool of international labour.

Nicola Sturgeon's opinion is simply that: Her own politically ambitious opinion. It does not take into account the post-referendum reality of Scotland having to play second fiddle to Whitehall.

As regards my portfolio: I am not holding any "referendum sensitive" stocks, and I intend keeping my modest amount of cash in sterling.

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Law Man

Feb 24, 2016 at 22:50

This is a site for investors rather than views on the merits of the EU; but equally we shall be voters in the referendum. So, what we need is guidance on the respective implications of Stay or Leave for investments.

The author expresses the common, and reasonable view, of Heart = Leave, Head = Stay. Another analysis could be Fear = Stay because to Leave would be a step into the unknown.

As an investor I want to make a 'head' decision, based on reasoned prediction of fact. As such I am looking for financial and economic journalists who can set out the likely implications of either decision. To date we have had little apart from the Capital Economics/ Woodford report, which I shall read with self interested interest.

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Denis Parkinson

Feb 25, 2016 at 00:46

I understand where you are coming from Law Man, but how does one know whose views to trust. The EU is such a mixture of cultures as well as political views.

I suspect the most important thing needs to be common sense, I personally think it will be far easier for the UK to manage its own affairs for the simple reason there will be less politicians & bureaucrats involved.

At the end of the day all countries will want to trade with each other. It is no good relying on businesses views who have vested interests, it is up to if you wish to give away your right to democracy, as the EU has only the goal of ever closer political union and obviously a single currency that does not work for all the countries all the time.

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Law Man

Feb 25, 2016 at 15:49

Denis: The last para of yours of 00:46 makes an important point. I suggest it is inevitable that Eurozone members must co-operate more closely, with a single Treasury and common tax & spend policies. This is a necessary part of monetary union, and would have avoided the PIGS crisis.

That will leave the UK as in the EU, but outside the overwhelmingly largest part of it.

This is not political advocacy, rather a reasoned prediction of what will happen within 10 years.

As investors, we need to know the implications of this. As voters it may be relevant to our decision.

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Karl Smith

Feb 25, 2016 at 15:51

It does seem to me that the consensus view of Citywire posters is for Brexit. However, other than fears regarding immigration and a certain mistrust of the EU political classes, I see little reasoned debate.

Considering the very poor voting turn-out for European elections it does seem a bit of a fallacy to expect a high referendum vote. The truth is the people are resigned to their fate (either way) and that the whipping up of fears (on both sides) is a pretty poor substitute for real engagement.

The polemics of the Farages of the world merely turn my stomach whilst the scaremongering of Prime Minister is equally distatsteful.

Instead of the political gamesmanship (I'm looking at you Boris Johnson) and the political opportunity (Farage & sturgeon) I'd be more interested in the views of the 20 and 30 something men and women who will be most affected by Brexit (or otherwise). Anyone over 50 (myself included) should just STFU

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Sinic

Feb 28, 2016 at 09:45

If every voter voted emotionally I believe that there would be a clear majority to leave. However, in my view, many of those posturing now about leaving will, when faced with that little voting slip, allow head to win, and vote to stay on the EU Titanic.

That is when our problems will really begin. The EU is an incompetently governed leviathan wrought, quite understandably, with national self interest. It is an economic, political, cultural and social economic experiment which has failed.

It can only succeed economically and politically with urgent and comprehensive federalisation at the total expense of sovereign, cultural and social considerations or by reverting to a free trade alliance at the expense of political ambition.

The inescapable fact is that with the probable eventual collapse of the EU, the UK whether in, which it probably will be, or out will be massively damaged.

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Christopher

Feb 28, 2016 at 10:26

And what is so wrong with a federal government of a united countries of Europe? One sees intelligent comment like Sinic's on the probability or otherwise of it happening, but little comment on why it would not be better than the relatively short lived experiment of the nation state, Germany before Napoleon 312 little duchies, before Bismarck 39 larger ones. Italy before Mazzini and Cavour, a mass of warring states and colonies. France, Spain and England long term states, but UK only 300 years old, and all three constantly at war with eachother and their other neighbours. Why not continue the progress from Iron and Coal to European Union and make it work?

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dlp6666

Feb 28, 2016 at 11:33

"I put my cash in dollars a while ago and would suggest it’s not too late to do that still"

But with the pound now at its lowest against the dollar for 7+ years, surely it IS too late.

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Stanuk

Feb 28, 2016 at 12:15

Anonymous 1, try to find time to read this book, or at least parts of it.

It takes the lid off the EU, if you still think their is any democracy of political influence in it when you finish it would be surprising. Entirely controlled by unelected bureaucrats.

Free down load here....

http://campaignforanindependentbritain.org.uk/wp-content/uploads/2014/03/387-Euros-a-Day.pdf

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Pianoman

Feb 29, 2016 at 15:34

Having read with interest comments for and against staying in or opting out, I have one question; If we leave the union can we make our own laws and rescind those imposed on by Brussels that we do not want?

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david rogers

Mar 01, 2016 at 21:12

Re Pianoman`s question, there are not many things regarding the consequences of leaving which can be answered with absolute conviction but this is one. We will certainly be able to take the steps he mentions . The only question will be how many and how soon.

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Anonymous 1 needed this 'off the record'

Mar 01, 2016 at 22:34

Christopher,

We are island with island mentality. This was explained to me ( and others) in the 6oties , by French , German, Italian academics and diplomats during in the seminars at French Academy, about possibility of

us English ever joining Europe.

And then, they said, even if the you join, you will be reluctant to stay, always looking for reason to be great again, rightly or wrongly, but to be great on your own terms, it is in your blood (that was before DNA) and in your mentality.

IT IS BECAUSE NO ENGLISH JUDGE, OR ENGLISH PARLIAMENT WOULD EVER ACCEPT TO BE SUBORDINATE TO ANYBODY ELSE.

This sentences stayed firmly with me over past 55 years , always in my mind at international meetings and working discussions. They were right then and they are right now.

I hope it would be easier for you to understand now the mood in this small English/ UK (?) investors circle.

It was nice to hear from you some refreshing thoughts, of academic value only, I am afraid, under present situation legal and de facto.

Yours,

less and less Anomyous 1

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Denis Parkinson

Mar 02, 2016 at 00:22

Anonymous 1,

It is alright for you to dream, but why on earth should my taxes be wasted. I believe the EU has just put on hold regulations about the size in Kilo Watts an electric kettle can be. (Worried at putting UK voters off the EU.) A fast boiling kettle rated at 2 Kilo Watts will boil twice as quickly as a kettle using 1 Kilo Watt. The amount of energy used to boil the water will be the same. Why do you need legislation, utter madness on the EU,s part, waste of tax payers money once again.

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Hotrod

Mar 02, 2016 at 08:33

@Denis Parkinson

So far the remain in campaign has not convinced me to give them my vote, but it's early days so I reserve judgement.

Regarding your point about energy consumption of kettles: May I clarify the details as I understand them. Power is measured in Kilowatts. (kW's) Energy is measured in Kilowatts per hour. (kW/h's) Capacity (of kettles) is measured in litres. Therefore to arrive at a universal unit of measurement which can be applied to all kettles: The datum is:- Kilowatts per hour per litre which will provide an industry standard which can be applied to any size of kettle.

The problem is not about how much energy an individual consumer is using. It's about the supply of that energy at peak times which causes headaches for generators. If appliances are known to consume energy at a given rate, it will help suppliers to deal with sudden surges in demand. Hope this helps.

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Denis Parkinson

Mar 02, 2016 at 15:34

Hotrod

Fair comment, the argument you have put forward suggests we should have less wind power & solar energy as it may be dark and the wind not blowing, as we are bound to have surges. Common sense would suggest far more Nuclear/Gas generating capacity which we appear to be lacking due to failures by political leaders to deal with this. Tony Blair, Gordon Brown & David Cameron.

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Graham Barlow

Mar 09, 2016 at 15:13

Having German Shareholders didn't protect the employees at German owned N Power did it. That goes for all Foreign owned businesses in Britain . They will make you redundant first and foremost before they turn on their own staff back home in Germany or France. 2400 Redundancies in and Electricity and Energy Utility is unheard of in Britain. Welcome to so called Foreign investment.

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Graham Barlow

Mar 09, 2016 at 15:22

I can remember the siren voices from so called British big business and the City calling for Britain to join the EURO. We stay out of the Euro at our peril! Doom and Gloom laden predictions everyday at the time . The City was going to go down the Pan. Well that didn't happen did it? The City got most of the Forex being outside the Euro. So would you believe any propaganda? No Go back to basics. Are we a sovereign nation in the EU? NO. Will we restore sovereignty? YES/ All I can say to those so called big businesses, they shouldn't have financed sterling assets on sterling income in Euro bonds. Bad management financially.

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Anonymous 4 needed this 'off the record'

Mar 21, 2016 at 13:26

I object very strongly to Mr Hargreaves openly associating himself with the LEAVE.EU It is by no means clear whether of not leaving the EU is in the interests of Hargreaves Lansdown clients.

Of course Mr Hargreaves can have his personal opinion and can express his views to his friends and at private meetings of LEAVE.EU. But in my opinion he should not sign unsolicited mail shots.

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Denis Parkinson

Mar 21, 2016 at 18:47

I object to David Cameron aligning with the in campaign, he said if he did not get the deal he wanted he would go for Brexit. He did not get the deal and he campaigns to stay in. What do you think of David Cameron then ?

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Hotrod

Mar 21, 2016 at 19:50

David Cameron will stick to what he knows, and more importantly, who he knows. Its called the establishment.

If in fact we do leave, these cosy relationships will be torn to shreds. Someone, somewhere, somehow, will have to negotiate new terms of trade, travel, and finance, and I can't see David Cameron doing that. My guess is, he would call an early election and then stand down.

Problem is: If we stay, how do we provide housing and subsistence for the tens of thousands of unemployed people who would continue to pour in. After all these services are stretched to the limit already.

What baffles me the most though, is the value of the Euro. The ECB is printing money like the Weimar Republic, but with little or no effect on inflation. How long can that continue before someone says "The Emperor has no clothes"

The best we can hope for is that those in the hot seats will not get hot heads.

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john zee

Mar 23, 2016 at 18:46

The dictatorship that is the EU reared its ugliest head when Merkel with the cooperation of Hollande abused EU laws by unilaterally inviting the invasion of refugees against all EU laws. Expect more similar actions. See threat that PM Vals of France promised England on a legitimate Brexit referendum.

The EEC free trade zone was/is a brilliant original concept that is being eroded by those power hungry fantasist, further endangering concepts of cooperation in trade and in law or security by putting themselves above all EU members.

Essentially the EU has become a Cabal of self-serving individuals without any legitimacy, seeking protection for huge incomes/perks with their ever increasing taxes (confiscations) at our individual expense . Get rid of them.

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Agnus nus

Mar 30, 2016 at 16:59

We need to rethink the way the European Market is run, the thing is broken beyond recognition with the greedy states wanted to dominate for their own gains.

Build on investment in poorer countries and not in mass migration, people leaving their homes for a set of broken promises? There needs to be a new order where transparency is at the core.

I rest my case.

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David Kempton: 5 stocks I'm buying as EU vote looms

by David Kempton on May 24, 2016 at 17:15

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