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The Persimmon share price has outperformed the FTSE 100 in 2020

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Back in March, when the Covid-19 pandemic was crushing Persimmon (LSE: PSN) and Taylor Wimpey (LSE: TW) shares, I really didn’t think I’d end up saying this. But, barring a last-minute catastrophe, the Persimmon share price looks set to beat the FTSE 100 in 2020. And by a decent margin too.

While the index is down around 12.5% at the time of writing, Persimmon is up more than 5%. Taylor Wimpey shareholders have not been so fortunate, mind, sitting on a 14% fall year-to-date. But I think the Taylor Wimpey share price is the more undervalued of the two. And I see a real hope for a much better 2021.

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I wasn’t too surprised to see housebuilder shares plunge in the early days of the crisis. It was disappointing, though, as they’d started the year strongly. The lockdowns did, unsurprisingly, have an adverse effect on the business. When you’re stuck at home, or can only go out for essentials, moving house is tricky, to say the least.

But before I look more closely at the Persimmon share price, and at Taylor Wimpey, there’s a lesson that the events of 2020 have reinforced for me. Whatever the short term brings to an industry, or to the whole economy or stock market, it won’t derail long-term forces.

In this case, we have a chronic housing shortage in the UK. It goes back as long as I can remember. There has always seemed to be some politician or other going on about the pressing need for affordable homes. And bemoaning the shortage that’s making it ever harder for people to buy a home of their own.

Persimmon share price recovery

At the first glint of a break in lockdown rules, people were rushing back to Taylor Wimpey, to Persimmon, and the rest, and eyeing up new homes. And since a 2020 low point in March, the Persimmon share price has more than doubled. The Taylor Wimpey share price hasn’t done quite so well overall. But since its low point, which came in September, it has climbed 70%. And I think that’s just the start of the recovery.

But what might 2021 hold for these FTSE 100 housebuilders? Well, my Motley Fool colleague Paul Summers has pointed out a number of factors that could contribute to a housing slowdown in 2021. I agree that those are real fears, and that they could indeed put pressure on the Taylor Wimpey and Persimmon share prices.

Trading updates

Persimmon and Taylor Wimpey should deliver trading updates in January. Based on what we have seen so far, I expect them to be upbeat and to have a positive effect on share prices. 

But thinking about both sets of potential short-term share price drivers brings me back to that lesson from 2020 again. The long-term outlook for a business is what matters. And that will surely overcome any short-term jitters. The Persimmon share price has done well, but I’d still buy both and stash them away for 20 years.

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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.

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