Taking into account any fallout from a ‘painful’ budget, November could turn out be an ‘interesting’ month for our biggest companies. But I reckon some FTSE 100 shares still have the potential to do very well.
The recovery’s on!
Housebuilder Persimmon (LSE: PSN) already takes up a position in my Stocks and Shares ISA portfolio. And, so far, it’s been very kind to me. The share price has climbed 65% in 12 months and 16% since January.
No doubt a lot of this momentum’s come as a result of inflation coming down. This has allowed the Bank of England (BoE) to begin cutting interest rates. Since then, property sales have climbed 29% year-on-year, according to Rightmove‘s house price index.
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With UK inflation falling to a lower-than-expected 1.7% in September, I suspect BoE governor Andrew Bailey and co will announce another cut next month. So there could be (a lot) more upside ahead for Persimmon.
Too far, too soon?
A positive trading update from the business on 6 November might also move the needle in the right direction. Any improvement to the expected number of full-year completions will probably go down well. Back in August, the firm said that it was looking at 10,500, or so. This was already at the top end of its previous guidance.
But what I want and what I get might be very different. Any sector-related announcements from chancellor Rachel Reeves on 30 October could reverse sentiment. There are rumours the increase in the stamp duty threshold — brought in by the previous government — will not be extended, for example. That would add thousands of pounds to the average home purchase.
However, I always intended to hold my shares for the long term. If other investors get nervy in November, I may buy more.
Turnaround titan
Also reporting next month is retailer Kingfisher (LSE: KGF). Based on the performance in 2024, the news should be pretty encouraging. The share price has jumped 30% so far, partly due to the company lifting the bottom end of its annual profit outlook. If the latter’s raised again in November, things could get even better.
While not the bargain it once was, I wouldn’t say the stock’s overpriced on a price-to-earnings (P/E) ratio of 15 either. The 4% dividend yield‘s attractive too.
So why aren’t I reaching for that Buy button?
A favourite with shorters
One concern is that trading can be very cyclical with home improvements easily postponed in tricky economic times. Even bad weather’s enough to put someone like me off visiting B&Q.
Out of interest, Kingfisher said in September that demand for big ticket items continued to be weak. Will this dramatically improve as we move into winter and following a nasty budget? I’m not convinced.
I’m also concerned by the ongoing interest from short sellers. Right now, I can see that a fair few traders believe some of the recent gains will be lost.
Those betting against a company can be wrong. If this proves to be the case, they’ll usually rush to close their positions, turbocharging the share price. Perhaps this will happen in November.
But this state of affairs all looks a bit too risky to me. I’ll be watching from the sidelines.
