£1,000 invested in Persimmon shares before the UK election is worth this much now

The last few months have been a wild ride for Persimmon shares. Here’s how our Foolish writer sees the state of the shares now.

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Housebuilders depend a lot on government policy and regulation. This was evident throughout the 2010s when homeowning was heavily promoted with schemes like Help to Buy and the sector went on a tear. None more so, perhaps, than Persimmon (LSE: PSN) shares, which went up around 20 times in value in less than a decade. 

The times

While the shares have stagnated since – thanks to supply cost inflation, costlier mortgages and a cost-of-living crisis – the times they are a-changing. A new government came to power. They want to “build, build, build”. The promise was housebuilding levels more reminiscent of when Bob Dylan still played acoustic! The mooted 300k new homes a year would be a 50% increase on current levels. If that target is to be reached, the private sector must be involved. 

So how have Persimmon shares reacted to the news? Well, initially at least, very well. The shares jumped 28% from the date of the election to October, a strong sign of optimism around the company. Then came the Budget and the price dropped 28%, near where it languishes now. The budget was hardly a boon to Persimmon. Rather it wiped out over £1bn of its market value!

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So it went up and down by the same amount in percentage terms? Annoying for us Persimmon shareholders, isn’t it? Well, it’s even worse than that! The 28% increase was on a smaller stake than the 28% decrease. So Persimmon shares are worth even less now. A £1,000 stake before the election is worth close to £922 now. 

Created with Highcharts 11.4.3Persimmon Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

What’s the core of the problem? CEO Dean Finch says he’s looking at a “period of squeeze”. He said that negotiations with suppliers have already hinted at more inflation. The primary causes are likely an increase in the minimum wage and employer’s NI across the supply chain. Those tax hikes will have an effect on Persimmon’s margins directly too, of course. 

Am I selling?

There’s a triple whammy here too, and it comes in the way of more stringent regulation. From next year, all new-build houses are having to move away from using gas boilers as part of Net Zero targets to eliminate them completely by 2035. That means builders will be choosing more costly alternatives. It might even mean fewer building completions if certain projects turn out to be unprofitable. 

It’s not all bad though. The firm delivered a positive trading update with increases on a raft of metrics. Visitor enquiries and other ‘soft’ metrics remained strong too, a good sign of positive momentum and the direction of where sales will be headed for the next few years. While it hasn’t been a particularly terrific few months for Persimmon, I don’t need to think twice about what I’m doing with my shares. It’s not a Sell for me.

But what does the head of The Motley Fool’s investing team think?

Should you invest £1,000 in Centamin 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 Centamin made the list?

See the 6 stocks

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.

John Fieldsend has positions in Persimmon Plc. The Motley Fool UK has no position in any of the shares mentioned. 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.

Pound coins for sale — 51 pence?

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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