Homebuilders offer long-term investment potential

Monday, 16 June 2008 12:00 AM

Homebuilders still offer long-term investment opportunities, despite recent falls in share prices according to investment specialist TD Waterhouse.

Two of the country's leading developers - Barratt Developments and Taylor Wimpey - have both seen sustained falls in value over the last 12 months, but investors now argue the stock may have reached rock bottom.

While a year ago today shares in Barratt Developments closed at 1,075 pence, on Friday last week the stock had fallen to just 86.50 pence - a fall of 92 per cent.

Similarly, shares in Taylor Wimpey were selling for 76.75 per cent a piece on the market this morning, while a year ago investors would have faced a cost of around 333 pence.

"What a difference a year makes," said Angus Rigby, chief executive officer of TD Waterhouse.

"In February 2007 shares in Barratt Developments were trading as high as £13, now they are trading at around 70 pence. This follows a bout of volatility and uncertainty that has seen the market captilisation of the UK's second biggest housebuilder fall to close to a tenth of its value a year ago.

"This week Barratt's chief executive attempted to calm investor fears about the future of the company, attributing blame on the unusual economic climate, while reassuring investors and shareholders that the company was not on the brink of collapse."

However, both companies have now moved into the TD Waterhouse top ten buys, as investors show confidence the companies can weather the present storm and recover in the long term.

"It was a similar story for Taylor Wimpey, Barratt's slightly bigger competitor and the UK's largest housebuilding group," continued Mr Rigby.

"Barratt and Taylor Wimpey enter our top ten buys this week indicating that at these heavily reduced prices, and despite anticipated dividend cuts, some of our customers see an opportunity to build greater gains over the long term," he added.

Chris O'Toole

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