his month has certainly been the most unproductive in the short history of this blog. My stock of ideas has kept growing but my willingness to actually act on these ideas has continued to shrink. I have continued to cut back on risk with the latest big changes in the VH portfolio being my disposal of all my retail stocks (Marks & Spencer (LON:MKS), Debenhams (LON:DEB), and JD) apart from a small position in Greggs and my acquisition of a massive short ETF position which should hedge around 50% of my ‘market risk’. I wouldn’t say that I have turned more bearish but it seems clear to me that although a 10% earnings yields is nice enough the risks involved are just too great.
As a result, I have begun to turn my mind to those sectors that haven’t really recovered since 2008. One of my first ideas was banks which seem to be the favourite value stock of choice amongst those investors of skill and reputation. I took a brief look at BAC’s 400-odd page 10Q and, unsurprisingly, concluded that I really didn’t know what I was doing. The other two perennial value sectors are pub stocks and house builders stocks. One of these areas has been done to death here so we will turn to the other.
I will split this topic up into two posts. In the first, I am going to give a general overview of the industry and the sort of numbers involved. I am also going to look at the house building programs announced by the government recently and try to find out how important this is going to be for the industry. In the second post, I am going to attempt to value a house building company, Barratt Dev. and look at some of the potential problems/challenges involved in actually valuing these companies.
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Summary:
- Both housing starts and completions have fallen dramatically in the past few years. Housing starts tend to lead to completions by roughly two years. Housing starts bottomed in the first quarter of 2009 and completions have stopped declining in recent quarters.
- However, at current levels it seems there is a significant shortage in new housing. If we are to believe the government’s 2008 projections then current starts need to grow slightly more than 140%…
