Wow, we should all hold on to our hats! The Taylor Wimpey (LSE: TW.) share price soared by a massive 42% in 2023. If it did that every year, we could be millionaires before we know it.
Now, it clearly won’t happen every year. And we need to put it all in context. The thing is, the stock has simply recovered a lot of its 2022 losses, but not all. If we put 2022 and 2023 together, we still see a 16% loss.
What have I done?
But I think the steep share price climb in the last couple of months of the year does show one thing.
I can picture investors holding their heads and asking: “What was I thinking when I sold housebuilder shares in 2022, when we still face a chronic housing shortage and almost certain long-term demand?“
Well, at least that’s what my thoughts would be had I followed the madness of the crowds and sold out when the price dropped… instead of buying more when they were super cheap.
But, to the big City institutions that were only looking to the next quarter, I say one thing. Thank you. On behalf of all the private investors who were able to snap up the long-term riches you discarded so cheap.
What goes down…
The Taylor Wimpey share price collapse prior to the start of 2023 was driven by the property market slowdown. I’d heard property investors tell me that the market can only keep going up.
But when inflation and mortgage rates triggered a reverse, we saw how wrong that can be. Even a business with a very strong long-term outlook can, as we see, hit the skids sometimes.
Recent data from Yorkshire Building Society show the number of house buyers down 30% in 2023. And that has to hurt any company in the business.
Why the reverse?
The overall impressive rise in the year only kicked off at the end of October, but why?
I reckon it’s a combination of two things. First, as interest rates started to fall, people saw some light. And I hope a lot of it is just down to seeing common sense.
Did anyone think interest rates would never come down and the housing market was finished for good? That the days of profit at Taylor Wimpey were over? Of course not.
So why were people shunning the stock for so long?
What to do now?
I still don’t really understand short-term thinking. When things I want to buy and keep for the long term get cheaper, I buy more — and I don’t sell what I already have.
Taylor Wimpey offers a forecast dividend yield of 6.5% now, which is great. But there’s still short-term risk, and it could come under pressure.
I’d rate the stock as fair value based on the next two years of forecasts, and two years of risk. But the long term makes me want to add some to my Persimmon holding, and I just might do that.
