Bargain hunters win with housebuilders but is there more value to come?

Saturday, Jun 15 2013 by
6
Bargain hunters win with housebuilders but is there more value to come

Back in late 2011 some of Britain’s biggest housebuilders were displaying signs of being bargain bucket shares with only the glimmer of potential to turnaround their fortunes in the near term. Since then, many of those value plays have seen their prices soar, justifying the bargain hunting credentials behind screening tools such as Benjamin Graham’s NCAV strategy. Eighteen months ago, this strategy was flagging the likes of Barratt Developments (LON:BDEV), Bovis Homes (LON:BVS) and Bellway (LON:BWY) as potentially attractive. But while systematic bargain investors have could have cashed in on their surging price momentum, it’s fair to wonder if these stocks could be at risk once again or whether there is more value to come. 

Housebuilders were at the sharp end of the country’s credit fuelled economic collapse when it hit equity markets in 2008. Shares in Persimmon (LON:PSN), for example, the largest of them by market cap, collapsed from £15 to £2.20 during 2007 and 2008. Despite a widely-acknowledged need for new housing, the subsequent collapse of the mortgage market meant many of these companies simply had to down bricks and cut costs where they could. 

While shares in Persimmon have since recovered to around £12, many industry-watchers think that the real road to recovery for Britain’s house building sector relies on how and when house prices correct themselves. Some believe that prices remain too high and that the comparatively rapid rebound in prices from the likes of Barratt, Taylor Wimpey (LON:TW.), Bellway and Bovis lack adequate foundations. 

Added to the mix is Chancellor George Osborne’s desperation to breathe life into mortgage lending (and house buying), which resulted in a new scheme in his March Budget called ‘Help to Buy’. According to the Home Builders Federation, some 4,000 people have reserved a new home using this Government-backed equity loan in just two months. That all sounds rather promising but detractors fear the move is blocking a correction in house prices and encouraging buyers to take on excessive debt. Albert Edwards at Societe Generale recently described the policy as “an unusually misguided piece of government interference in the housing market”. He stressed that UK house prices, and London most especially, had never…

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As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested. ?>


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Persimmon Plc is a United Kingdom-based holding company. The Company is engaged in house building within the United Kingdom. The Company trades under the brand names of Persimmon Homes, Charles Church, Westbury Partnerships and Space4. The Company offers a range of homes from studio apartments to family homes in approximately 400 locations under Persimmon Homes brand. The Company builds homes under Charles Church brand in a range of locations. The Company focuses on affordable social housing and sells these homes under Westbury Partnerships. The Space4 business operates an off-site manufacturing plant producing timber frames, insulated wall panels and roof cassettes as a fabric first solution to the construction of new homes. more »

LSE Price
1991.5p
Change
-5.5%
Mkt Cap (£m)
6,714
P/E (fwd)
7.4
Yield (fwd)
11.2

Bellway p.l.c is a holding company of the Bellway Group of companies. The Company is engaged in the building and selling of homes, ranging from one-bedroom apartments up to five-bedroom family homes, as well as providing social housing-to-housing associations. It focuses on providing traditional family housing outside of London and apartments within the London boroughs, in zone 2 and beyond. It operates in 19 trading divisions in England, Scotland and Wales: Durham, East Midlands, Essex, Kent, Manchester, North East, North London, North West, Northern Home Counties, Scotland, South London, South Midlands, South West, Thames Gateway, Thames Valley, Wales, Wessex, West Midlands and Yorkshire. It also offers second-hand homes of various types, such as detached, apartment, terraced, semi-detached, town house, bungalow and penthouse. It also offers various additions covering kitchens, electrical, fire surround and fire, ceramic tiling, flooring, bathrooms and gardens, among others. more »

LSE Price
2872p
Change
-3.2%
Mkt Cap (£m)
3,653
P/E (fwd)
6.7
Yield (fwd)
5.1

Barratt Developments PLC is a holding company. The Company is principally engaged in acquiring and developing land, planning, designing and constructing residential property developments and selling the homes, which it builds throughout Britain. The Company operates in two segments: Housebuilding and Commercial developments. Its housebuilding segment operates through approximately six regions and approximately 30 operating divisions delivering over 17,319 homes. Its Commercial developments are delivered by Wilson Bowden developments. It purchases land in targeted locations and designs homes for its customers using standard house designs. Its brands include Barratt Homes, David Wilson Homes and Barratt London. Its Barratt Homes brand focuses on making homes. Its Barratt London brand portfolio offers apartments and penthouses in Westminster to riverside communities in Fulham. Its David Wilson Homes brand offers home design and specification, and focuses on developing family homes. more »

LSE Price
571.4p
Change
-4.3%
Mkt Cap (£m)
6,055
P/E (fwd)
8.5
Yield (fwd)
7.5



  Is LON:PSN fundamentally strong or weak? Find out More »


1 Comment on this Article show/hide all

harryr 16th Jun '13 1 of 1
1

The House Builders shares may well keep on going up as the city just loves them right now.
I do not, investors might like to take a look at the CO OP commercial property portfolio.
Six years after the boom went "bust" in that sector prices outside London just keep falling despite just about free money since then.
That cost of money will at some stage rise, builders who are again bragging about the size of their so called cheap land banks will be smashed, so will the banks and so will the UK.

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