The Persimmon share price is up more than 6% this morning, but it still looks like a top FTSE bargain to me.
The entire building sector has enjoyed a boost this morning from reports that chancellor Rishi Sunak may suspend stamp duty to revive the housing market. Investor sentiment has been further lifted by positive results from the UK’s largest housebuilder Barratt Developments.
The Barratt share price is similarly up 6% after it reported a “strong” forward order book with sales ahead of last year. It also reported a “welcome recovery in internet activity, site visitors and net reservations across both the industry and our business.”
The double dose of good news has boosted all the major housebuilders, with Crest Nicholson Holdings, Redrow, and Vistry also climbing. Yet I reckon these could still be FTSE bargains because the recovery has further to run.
I remain a fan of the housebuilders as a source of long-term income and capital growth. Yet the sector has been through a bumpy time since Brexit. Coronavirus bought the housing market to a halt. But one thing hasn’t change. Demand for property will remain high as the population rises, and supply cannot keep up.
I’d buy these FTSE bargains
A week ago, I tipped the Barratt and Crest Nicholson share prices, hailing them as top FTSE 100 bargains worth buying ahead of the recovery.
Persimmon (LSE: PLC) also tempts me. I tipped the FTSE 100 stock at the height of Covid-19 gloom in early April after it mothballed construction sites, stopped selling homes, and cancelled its interim dividend.
At the time, the Persimmon share price stood at 1,666p. Today, it trades at 2,403p. That’s a rise of 44%. I’m no stock-picking genius. I simply follow the Motley Fool philosophy of hunting down top stocks at times of crisis, with the aim of holding on for the rebound. This strategy is proving itself yet again.
I’d still buy Persimmon today. Despite the recent recovery, its stock remains a third below its pre-coronavirus crisis peak in January. It trades at 8.5 times earnings, if you can trust the P/E ratio in these strange times.
This stock is cheap after the market crash
Fellow-housebuilder Vistry Group (LSE: VTY) looks even cheaper at 6.71 times earnings. It might offer an even better buying opportunity, as the share price is still 50% below January’s peak.
Again, the group had to scrap its dividend to conserve cash, but at least it compensated investors by issuing £60m of shares in lieu. I wish more companies had done that.
The FTSE 250 group was going great guns before the crisis, with profits up 12% in 2019 and margins hitting 17%. In May, it reported a forward order book totalling £827m. It does have net debt of £476m, but this is balanced by committed banking facilities totalling £770m, with well-spread maturities out to 2027.
Housebuilding still looks like a tempting sector for long-term investors looking to benefit from the stock market crash.
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