Of all the crashing shares in the FTSE 100, I can’t help thinking Taylor Wimpey (LSE: TW) might be the biggest bargain there is. The Taylor Wimpey share price is down 19% since its 19 February price, while the Footsie has lost 20%.
It’s entirely possible that a big coronavirus outbreak in the UK could delay people’s house buying plans, leading to a slowdown in demand. It’s even possible that it could go on for months.
And with so many investors fearing a hit on housing over the next couple of years, following on from our Brexit departure, I’m really not surprised to see Taylor Wimpey shares so badly out of favour.
But, as private investors, we really need to be in this for the long term. Are you worried about where the value of your investments is going in the next few weeks, months, or even the next couple of years? If I had a short-term horizon like that, I wouldn’t be buying shares at all.
No, my shareholdings are for the long term. I have no plans to sell anything for at least the next decade. Share prices have no practical meaning for me, except for one thing — when they fall, I look to buy more.
I’ve been bullish about the housebuilding sector for some time, and I’ve invested a little of my pension cash in Persimmon (LSE: PSN). Persimmon shares have suffered too, down 23% over the pandemic period. But thanks to a strong start to the year, the share price is actually only down 5.5% so far in 2020. That means I’m suffering more lightly than other housebuilder investors.
Price fall? No worries
A share price fall wouldn’t bother me much, mind, and that’s because I’m a buyer of shares and not a seller. For those with a long-term horizon who are buying shares to hold for the next decade and more, price falls are good things. That’s because they offer us better opportunities.
If you go to the supermarket and see there’s a sale on frozen chips, are you downbeat because your stock back home in the freezer is now worth less? No, if you have any sense, you’ll buy more while they’re on offer.
It’s the same with shares, and I’m looking to top up my housebuilder holding. One thing I like about Persimmon is the dividends my shares have been paying me. And with the price having fallen, the forecast yield is now up to 9.6%. If I buy more now, and the dividend holds up, I could nearly double my investment over the next 10 years even if the share price stays flat.
Tempting Taylor Wimpey share price
But I’m tempted to branch out a little and buy some Taylor Wimpey shares. It is, after all, the UK’s biggest listed housebuilder. And it seems more likely than any to be able to weather any downturn. Even if there is a downturn, I’m convinced that it will only be a short one. Recent estimates suggest the UK’s housing shortage could be anywhere between a million and 1.2 million homes. No coronavirus pandemic is going to make much of a dent in that.
On top of that, the forecast Taylor Wimpey dividend now stands at a very tempting yield of 9.8%. That’s a bit higher even than Persimmon’s.
Taylor Wimpey is very high on my buy list, and I’m also certainly not contemplating selling any Persimmon shares.
Alan Oscroft owns shares of Persimmon. 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.