Taylor Wimpey (LSE: TW) shares have looked an unmissable buy in recent weeks and I was desperate to add them to my portfolio. Unfortunately, I didn’t have the cash, and while I waited, the rest of the market woke up to the opportunity.
The Taylor Wimpey share price has rocketed 10.92% in the last week, which means it’s not as cheap as it was. So what should I do now?
I love buying undervalued FTSE 100 shares, especially if they come with a terrific yield. Taylor Wimpey fitted the bill, trading at around six times earnings while paying income of 8.27% a year. It was at the top of my buy list.
More expensive (but still cheap)
Taylor Wimpey shares have crasehd 34.55% over five years as fears of a UK property bubble grew, although they’re only down 3.61% over 12 months. Rival Persimmon has fared much worse, falling 52.7% over five years and 34.72% over one.
Taylor Wimpey looks a more solid proposition than Persimmon, which issued a profit warning in March and slashed its dividend by three-quarters. Management has a policy of returning 7.5% of net assets to shareholders annually, which will total at least £250m a year.
That policy remains in force despite today’s challenges and Taylor Wimpey is forecast to yield 8.05% this year and 8.06% in 2024. These are already inflation-busting rates of income, and the differential will only widen as consumer prices continue to fall. I may get share price growth on top of that too as the outlook brightens.
So I had mixed feelings when June’s inflation figure came in lower-than-expected at 7.9% on 19 July and the FTSE 100 surged 1.8%. Taylor Wimpey rose 6.8% and my heart sank by a similar percentage. I’d called the stock correctly, but couldn’t act due to lack of cash.
Should I accept that I’ve missed out and go hunting around for other FTSE 100 bargains instead? I’m not so sure.
There’s still time to buy it
Although the Taylor Wimpey share price is up another 1.38% on 20 July so far, I wouldn’t call it expensive, trading at 6.19 times earnings while yielding 7.97%. Yes, it was cheaper before but that’s investing. It’s rare to buy a stock at the absolute perfect time, and when that happens it’s mostly down to luck.
June’s inflation figure was a real boost for sentiment, and things may get even better in July, when markets reckon inflation could fall below 7%. If they’re right, mortgage rates may fall and Taylor Wimpey shares could enjoy another leg up.
The stock could just as easily fall before then. We’re likely to see a bout of profit taking over the next few days. The Bank of England might deliver an aggressive base rate hike at its next rate-setting meeting on August 3. Taylor Wimpey or another housebuilder could deliver some unexpected bad news. If that happens, its shares will get cheaper and I’ll have my chance.
I’ve absolutely no idea where the stock will go next. Nobody ever does. The only thing I do know is that Taylor Wimpey shares still look cheap and that dividend looks unmissable. I think the best time to buy the stock is when I have the cash. Hopefully, that won’t be long now.
