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By Malcolm Stacey | Monday 9 July 2018
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Hello, Share Finders. Housebuilders attract a few warning signs on this splendid website. But there are still some strong signals to keep buying. The most important, perhaps, is the all-important demand versus supply issue. And though house prices are flat or falling, depending where you live, the shortage of affordable homes gets no better.
One example of how house builders continue to do well is Bovis Homes (BVS). And before you stop reading at this point, let me hastily add that the prospective yield I have is 9.2%. Very attractive, don’t you think? The first six months’ numbers show that finished new houses rose 4.5% on last time.
Other builders which rose, as I predicted, on low interest rates and government incentive schemes, have generally been doing better than Bovis. But now this reviving company is catching up. Bovis has been selling a few assets. It’s also improving customer service, so important when you’re persuading people to part with such huge sums.
Half of the company’s new homes are classed as ‘affordable’. This is a generous proportion and it’s the area the government has pledged to put most of its housing support. What we ought to find especially encouraging, gang, is that debt of £32 million last time has now been transformed into £40 million cash on the balance sheet. Meanwhile, assets are still being sold and the cash position is expected to strengthen even more before 2019.
The management have made some bullish statements about increasing profitability. And though anyone can say that, the considerations outlined above, show that there is some clear support for that view. I already hold a few builders and have no plans to expose myself further to any possible crash in the house market, but if I was starting from scratch, I would maybe buy some Bovis shares first.
And now let’s build some fun into the Punter’s Return.
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