After they fell 29% last week, should I buy Vistry shares for my Stocks and Shares ISA?

Some unexpected news sent Vistry shares sharply downwards. Our writer considers whether this is an opportunity to boost his Stocks and Shares ISA.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Modern suburban family houses with car on driveway

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

As a risk-averse investor, I’m always on the lookout for FTSE 100 shares to add to my Stocks and Shares ISA. Although there are no guarantees, the UK’s largest listed companies typically deliver the fewest surprises meaning their share prices are generally less volatile.

However, last week, Vistry Group (LSE:VTY), the Footsie housebuilder, proved this isn’t always the case.

On 8 October, its shares closed 24.3% lower after the company disclosed that the “total full-life cost projections” to complete nine of its developments had been underestimated by around 10%.

Should you invest £1,000 in British American Tobacco right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if British American Tobacco made the list?

See the 6 stocks

It didn’t elaborate as to what went wrong, other than to say that changes to the management team were under way.

Whatever the cause, it’s a costly mistake.

At one point, the shares were down 34.7%. By Friday (11 October) it had the smallest market cap (£3bn) of all the stocks in the FTSE 100. Relegation to the FTSE 250 is a distinct possibility if that doesn’t change.

Created with Highcharts 11.4.3Vistry Group Plc PriceZoom1M3M6MYTD1Y5Y10YALL14 Oct 20195 Apr 2025Zoom ▾Jan '20Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '24Jan '25202020202021202120222022202320232024202420252025www.fool.co.uk

A costly mistake

Although isolated — the company has 300 developments under way — the error means profits will now be £115m lower over the next three financial years (2024-2026).

Shareholders will be devastated by the news. Despite well documented problems with the housing market, the company’s financial performance has been resilient.

It remains on course to sell 18,000 properties in 2024, an increase of 11.7% on 2023. And 50.6% more than in 2022.

Doing things differently

Vistry is different to other housebuilders because of its emphasis on partnering with local authorities, housing associations and private rented sector bodies.

It describes its business model as “capital light”. Indeed, during the six months ended 30 June 2024, 76% of its completions were partner funded.

And this approach gives it a class-leading return on capital employed (ROCE). In 2023, it reported a ROCE of 21.3% compared to, for example, Persimmon’s 10.5%.

Is there an opportunity here?

But despite the pullback in its share price, I don’t want to buy any Vistry shares at the moment.

In my eyes, its reputation has been dealt a severe blow as a result of last week’s news. Such a basic mistake is unforgivable.

However, even if the company was able to properly estimate its costs, I wouldn’t want a stake. That’s because I already have exposure to the construction sector — whose stocks have a reputation for paying generous dividends — through my shareholding in Persimmon.

Admittedly, it’s significantly cut its payout as a result of the downturn in the property market. However, it’s still yielding 3.8%, identical to the FTSE 100 average.

By contrast, Vistry doesn’t pay a dividend.

Instead, after “extensive consultation with its shareholders” it’s decided to pursue a policy of share buybacks.

I’m not going to debate the pros and cons of a company buying its own stock. But some claim it’s better for shareholders because they’d have to pay tax on any dividends received. However, they wouldn’t have to if a stock was held in an ISA anyway.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Personally, I’d rather have the cash in my hand.

To sum up, due to concerns about its poor internal controls and the absence of a dividend, I’m not going to take advantage of the dramatic (and unexpected) fall in Vistry’s share price.

Should you buy British American Tobacco shares today?

Before you decide, please take a moment to review this first.

Because my colleague Mark Rogers – The Motley Fool UK’s Director of Investing – has released this special report.

It’s called ‘5 Stocks for Trying to Build Wealth After 50’.

And it’s yours, free.

Of course, the decade ahead looks hazardous. What with inflation recently hitting 40-year highs, a ‘cost of living crisis’ and threat of a new Cold War, knowing where to invest has never been trickier.

And yet, despite the UK stock market recently hitting a new all-time high, Mark and his team think many shares still trade at a substantial discount, offering savvy investors plenty of potential opportunities to strike.

That’s why now could be an ideal time to secure this valuable investment research.

Mark’s ‘Foolish’ analysts have scoured the markets low and high.

This special report reveals 5 of his favourite long-term ‘Buys’.

Please, don’t make any big decisions before seeing them.

Claim your free copy now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

James Beard has positions in Persimmon Plc. The Motley Fool UK has recommended Vistry Group Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

£20K invested in Tesla stock last April is now worth…

Despite all the bad headlines lately, Tesla stock has put in a storming performance over a 12-month timeframe. Is this…

Read more »

Investing Articles

If a 40 year old invests £600 a month in a SIPP, here’s what they could have by retirement

With no retirement savings at 40, an investor could put £600 a month into a SIPP and grow its value…

Read more »

Stack of British pound coins falling on list of share prices
Investing Articles

Why hasn’t its 9.9% yield boosted the Phoenix share price?

Phoenix Group has a dividend close to double digits, but saw a weak share price performance in recent years. Christopher…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing Articles

With average 10% yields, these mid-cap FTSE shares could supercharge a passive income portfolio

Some of the best passive income gems can be found on the UK's smaller indexes like the FTSE 250 and…

Read more »

A coin being dropped into a piggy bank
Investing Articles

As the Barclays share price tanks 19% in 2 days, is this a great buying opportunity?

As a trade war sends the Barclays share price into a tailspin, Andrew Mackie steps back to look at the…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

Is Fundsmith Equity still a good choice for a Stocks and Shares ISA in 2025?

Many Britons hold the Fundsmith Equity fund in their Stocks and Shares ISAs. Is this still a good move? Edward…

Read more »

Investing Articles

Nvidia stock is down 24% this year. Time to buy the dip?

Christopher Ruane has been eyeing Nvidia stock as a potential addition to his portfolio for a while. Is a recent…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Down 25% since January, this resilient dividend stock’s catching my eye

Maintaining the UK’s rail, water, and energy infrastructure isn’t the most exciting business. But it has made this a solid…

Read more »