FTSE 100 real estate provider Barratt Developments (LSE: BDEV) saw a 14% jump in share price the day the Tories came into power with a majority last month. This was no coincidence, of course. Real estate is a cyclical sector, meaning it is sensitive to macroeconomic conditions. Prolonged uncertainty was doing the sector no good, but the election results finally broke the Brexit-related limbo.
Sharp real estate run-up
For investors in BDEV, there couldn’t be a better time. Its share price breached the £7 level on the day, consistently stayed above it and more recently breached £8 (before sliding back a bit) as well. It was a good company to invest in earlier, but with the path to Brexit now clear, it seems that all doubts have cleared from investors’ minds. The story’s similar for other FTSE 100 real estate developers like Berkeley Group Holdings, Taylor Wimpey, and Persimmon, whose share prices haven’t looked back since mid-December either.
With a price to earnings (P/E) ratio of 11 times, BDEV still looks affordable, making it a worthwhile investment even now.
The only catch is this. I’m just not sure if its price can increase at speed. Consider this – from the price spike on 13 December up to the latest close, its share price has risen 5.8%. This isn’t a bad increase in five weeks, but it doesn’t compare to the expectations that were set up by the sharp increase seen the day the results were announced.
Besides this, I’d really like to see improvement in real estate numbers before investing in this type of company now. The government’s latest numbers on house prices are encouraging. But given the weakness seen over the past few months, I’d wait for more confirmation of the latest trend.
Buy when the chips are down
It’s no reason for despair, though. I still think there are still plenty of FTSE 100 stocks that can double my money in a reasonably limited time frame. One of these is the consumer goods giant Unilever, whose chips have been down for over a month. It sounded somewhat diffident in its latest update, but I’m not exactly worried when I consider the details. It’s a quality stock, whose price is down at the moment, but it has doubled investor capital in half a decade. It’s a fine buy.
Clearly, though, there are investors who don’t think quite the same way. That’s the reason the ULVR share price is still weak. If you are also thinking like them, then consider another company. The FTSE 100 analytics provider RELX has more than doubled investor money in the last five years. It part of a growing industry, is financially healthy and there’s no reason to suggest it won’t continue doing well in the future. If ULVR is a fine buy, RELX is even better.
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Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended RELX. 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.