Intensifying fears over the coronavirus are weighing heavily on investor confidence today. Share bourses across the globe are tipping lower. The fast-developing situation means it’s anyone’s guess how bad the washout will prove to be.
That’s no reason to pull up the drawbridge though. Warren Buffett’s famous advice that share pickers should “be fearful when others are greedy and greedy when others are fearful” springs to mind right now. It’s a reason why I just tipped Wizz Air as a great buy following heavy weakness in Monday business.
I also reckon major brickmaker Ibstock (LSE: IBST) is a top stock to buy today. The price fall here has been much more modest compared with many other shares, like the airlines and shipping operators. With fresh financials just around the corner, I reckon a spurt to fresh record highs might be just around the corner as well.
Resilience in tough markets
I own shares in Ibstock. As an owner of housing shares Barratt Developments and Taylor Wimpey too, I considered it to be a great play on the UK’s chronic homes shortage and the need for Britain to supercharge building rates to keep up with demand.
The FTSE 250 firm’s latest January update was quite impressive. Then it said total 2019 revenues were up by “mid-single digits for the full year,” a consequence of better clay brick prices, rising volumes for some of its key concrete products, and the impact of the Longley Concrete acquisition made last summer.
Okay, it’s not a spectacular result at headline level. But considering the massive political and economic uncertainty that has smacked construction rates more recently, Ibstock has performed quite robustly. It’s a result, in fact, that reflects the country’s structural brick shortage that’s kept prices of the building blocks creeping higher.
Better news to come?
In last month’s release, Ibstock struck a note of caution over its near-term profits prospects. It warned that “the lower levels of residential construction activity in the second half of 2019 have created a more subdued market backdrop as we enter 2020.”
I reckon the company might be more optimistic in preliminaries scheduled for Tuesday, 3 March though. A string of homebuilders have put out perky trading releases since the turn of 2020. And a couple of them, such as Vistry Group and The Berkeley Group, have spoken about their bright production plans too (the latter plans to boost its prior completion targets by 50% over the next six years).
Expect, then, for Ibstock’s share price to gain more ground in the sessions ahead. Its forward P/E ratio of 16.1 times is quite cheap given its robust long-term profits outlook, in my opinion. And a 4.5% corresponding dividend yield beats the UK mid-cap average of 3% by quite a margin, making it an attractive target for income seekers.
Ibostock said last month that “the market fundamentals for new build housing in the UK remain robust, with a structural deficit of housing, low interest rates and unemployment, and the Government’s Help-to-Buy scheme in place until 2023.” This is a share I plan to hold for many years to come.
Royston Wild owns shares of Barratt Developments, Ibstock, and Taylor Wimpey. The Motley Fool UK has recommended Ibstock. 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.