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By Malcolm Stacey | Monday 22 October 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 Tweakers. As someone who regularly sets himself up as an Aunt Sally for Tom’s entertaining bearcasts, I hesitate to commend a home builder to you. But I really think Barratt Developments (BDEV) is worthy of your support. And I base that view on its latest trading report.
Forward sales for the latest quarter amount to nearly 13,000 homes. That will bring in £3.1 billion. It compares to £2.8 billion last time. To counter those who say house prices are falling, it seems that Barratt’s house prices increased by 5%. For the full year ending in September, pre-tax profit improved by 9.2% to £835.5 million. Encouraging, or what?
For what it’s worth, I feel that fears about Brexit and Brexit itself depressing prices are overdone. Will fewer rich Europeans want to buy here, and will buyers in a wider world than Europe still want to invest here? The answer may still be ‘yes’.
Meanwhile, the tailwinds are strong and getting stronger. For example, rising interest rates are hardly progressing at a hurricane rate. So mortgages should continue to be dirt cheap. Add in stamp duty concessions, the Help to Buy plan, lifetime ISA’s and a vast shortage of new homes and you can see that shares in housebuilders have a lot of external help at the mo.
The company says it might pay special dividends over the next 12 months, or it might go for a share buy-back programme. Either way it’s a nice bonus, reflecting the company’s confidence in a rosy future, for the shorter term at least.
Yes, housebuilder prices can be a volatile thing and sometimes they fall when share prices for other sectors rise. But I still think they should not be dismissed. And it seems to me that Barratt is as reliable a builder as most.
And now let’s rejoin the Punter’s Return.
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