Why Brexit could be a huge opportunity for investors

The S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has plunged in afternoon trading, down 3.8% at 5,082.30.

And the market could end down much further by the time the ASX rings the closing bell, thanks to Britain voting to leave the European Union (EU).

It was a stunning reversal of what most people had expected, with bookmakers predicting Britain would remain in the EU, although various polls over the past week had swung either way – showing it was going to be a close vote.

However, markets don’t like uncertainty – and there is now a great deal of uncertainty over what happens next. European markets are likely to fall heavily when they begin trading later today, and the US is likely to follow. Investors will obviously be concerned that this has set a precedent and other countries may decide to leave the EU.

A worst case scenario could see the EU splinter and collapse.

Sell off over done?

But it could also be a huge opportunity for Australian investors. Whatever happens next, or however long it takes for Britain to withdraw, Australians are still going to continue buying food, building houses, using financial services and travelling.

That means the heavy falls experienced by the big four banks Australia and New Zealand Banking Group (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC) may be overdone.

ANZ’s share price fell 4.8% to $23.27, CBA was down 4.2% to $71.90, NAB was down 4.5% at $24.44 and Westpac’s share price was crunched 5.3% down to $28.08.

Woolworths Limited (ASX: WOW) and Wesfarmers Ltd (ASX: WES) are also unlikely to be affected much by Brexit given the billions in revenues they will continue to generate in their supermarkets and liquor divisions. Investors still sold off both companies with Wesfarmers share price down 2.9% and Woolworths 1.7%.

Better opportunities ahead

Should European and US markets sell off in the next few days, that could be a perfect opportunity for Australian investors to pick up shares going cheap.

Foolish takeaway

My portfolios (SMSF and personal) have been whacked today, but I’m not all that concerned. Given the opportunity to pick up shares in high quality companies at cheap prices means I’m more excited than anything else.

Get your watchlists ready.

3 blue chips better than the banks?

Discover The Motley Fool's Top 3 blue chips for 2016. These 3 'new breed' shares pay fully franked dividends AND offer the prospect of significant capital appreciation. Simply click here to gain access to this comprehensive FREE investment report.

No credit card required!

Motley Fool writer/analyst Mike King owns shares in Woolworths and Wesfarmers. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.