The Motley Fool

The Taylor Wimpey share price has crashed 10%. Here’s why I’d buy right now

Image source: Getty Images.

Would you rate Taylor Wimpey (LSE: TW) as a defensive stock? Seeing the slump in the Taylor Wimpey share price since the Covid-19 pandemic hit, you might say no. And a fall of 10% Wednesday would probably reinforce that opinion.

But I reckon it all depends on your timescale. If you want a hedge against short-term ups and downs, then no, I wouldn’t go for a housebuilder. I think the picture changes, though, if you look to the long term. But first, what’s behind Wednesday’s price drop?

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

It’s all down to a first-half results release, which revealed a £39.8m pre-tax loss. With the Covid-19 lockdown pretty much halting house sales, Taylor Wimpey’s six-month revenue dropped by 56.4% to £1,733m. I’m not surprised the Taylor Wimpey share price fell in response, but I think that’s a result of short-term thinking.

Taylor Wimpey share price

Were people expecting good results for the period? I certainly wasn’t. Chief executive Pete Redfern said: “Looking ahead, balance sheet strength, a long order book and our high quality and growing landbank gives us confidence in our ability to navigate the challenges and emerge stronger from the pandemic“.

That’s what I think makes Taylor Wimpey defensive with a long-term view, and why I see the Taylor Wimpey share price as cheap now. It’s in an essential market, and is in no financial trouble whatsoever. Net cash actually stood higher, at £497.3m, than at the same time a year previously.

I’ll leave the last words to Redfern, who said “we are confident in the underlying fundamentals of the housing market“.

Long-term defensiveness

I recall a headline in The Onion some years ago that went something like: “World death rate unchanged at 100%“.

If our UK housing shortage is something that won’t be going away for a long time, death is going to be with us for a lot longer. So as we’re destined to need the services of funeral firms some day, why not use them in the meantime to try to build up some retirement cash?

If Dignity (LSE: DTY) is in a long-term defensive business, that’s been far from clear from the firm’s performance in recent years. A series of well-documented problems has led to a share price slump, and the Covid-19 crisis made things worse. So far in 2020, the Dignity share price has lost 50%. And worse, it’s down nearly 90% over the past five years.

Price boost

But interim results released Wednesday gave shareholders cause for cheer, boosting the price by 20%.

The company reported a 9% rise in underlying revenue, with underlying operating profit up 6%. Cash generation was very strong, up 33%. Part of the reason was, sadly, a 23% increase in the number of deaths handled. According to executive chair Clive Whiley, the company doesn’t expect to need any external funding or to furlough any employees.

Reading strong financial figures from a funeral firm always evokes contrasting feelings. But from an investing perspective, just remember that ultimate 100% death rate. Both the Taylor Wimpey share price and the Dignity share price make me want to buy.

A Top Share with Enormous Growth Potential

Savvy investors like you won’t want to miss out on this timely opportunity…

Here’s your chance to discover exactly what has got our Motley Fool UK analyst all fired up about this ‘pure-play’ online business (yes, despite the pandemic!).

Not only does this company enjoy a dominant market-leading position…

But its capital-light, highly scalable business model has previously helped it deliver consistently high sales, astounding near-70% margins, and rising shareholder returns … in fact, in 2019 it returned a whopping £150m+ to shareholders in dividends and buybacks!

And here’s the really exciting part…

While COVID-19 may have thrown the company a curveball, management have acted swiftly to ensure this business is as well placed as it can be to ride out the current period of uncertainty… in fact, our analyst believes it should come roaring back to life, just as soon as normal economic activity resumes.

That’s why we think now could be the perfect time for you to start building your own stake in this exceptional business – especially given the shares look to be trading on a fairly undemanding valuation for the year to March 2021.

Click here to claim your copy of this special report now — and we’ll tell you the name of this Top Growth Share… free of charge!

Alan Oscroft has no position in any of the shares mentioned. 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.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.