Well, what a year it’s been for Taylor Wimpey (LSE: TW). The residential housebuilder saw its share price crash from nine-year highs of 210p to lows of 116p within weeks of the EU referendum. Many were predicting doom and gloom for the UK housing market, while the contrarians among us spotted a unique buying opportunity. So looking back, was the post-Brexit sell-off good news or bad for UK investors?
Warren Buffett’s advice
Well, it depends who you ask. Those who got caught up in the Brexit panic and decided to sell in June, might be disappointed to hear that the share price has fully recovered. For those, let’s speak no more of it, learn from the experience and move on. Those who ignored the doom-mongers and held on to their shares with a longer-term view, well done, you’ve been vindicated.
And finally we come to those brave individuals who decided to go against the herd and buy the UK-focused housebuilder when others were dumping their holdings. You may have felt like you were swimming against the tide of prevailing opinion, but you were actually following the advice of master investor Warren Buffett, who advises us to be greedy when others are fearful.
So what now?
Last month the group announced a very positive set of results for 2016, delivering an excellent performance against a backdrop of political and economic uncertainty. Total revenue came in 17.1% higher at £3.7bn, compared to £3.1bn the previous year, with pre-tax profits soaring 21.5% to £733m.
I’m still cautiously optimistic about Taylor Wimpey’s long-term prospects. The group has made a strong start to 2017 with robust trading and good levels of demand underpinned by a competitive mortgage market and low interest rates. The share price may have fully recovered from the Brexit sell-off, but I think the shares still offer good value at just 10 times forecast earnings, with a generous affordable dividend yielding 7%.
10-year plan
Another FTSE 100 housebuilder that’s impressed me lately is Persimmon (LSE: PSN). Like many of its peers, it was one of the big casualties in the wake of the EU referendum, but has managed to recover well despite the continued uncertainties.
The York-based group recently posted an excellent set of results for 2016, as it completed the fifth year of its 10-year strategic plan. Underlying pre-tax profits were up by an impressive 23% to £783m, with revenues coming in 8% higher than the year before at £3.14bn.
The group continues to deliver disciplined growth by opening new development sites swiftly following planning consent and then progressing a build programme to secure rates of new home construction to meet market demand. For me, Persimmon remains an attractive investment with a modest P/E rating below 10, supported by a healthy 6% dividend that’s covered almost two times by forecast earnings.
