MJ Gleeson

Housebuilders like MJ Gleeson (LSE:GLE) have been under pressure since interest rates began rising a few years back. While the Bank of England is tipped to cut its benchmark very soon, nothing is guaranteed, creating lasting risk for companies like this.

But if City brokers are right, Gleeson could be about to enjoy a sharp rebound in annual earnings. The builder’s bottom line is tipped to increase 12% and 18% in the financial years to June 2025 and 2026, respectively.

Over the long term, demand for newbuild homes is expected to rise across the board as Britain’s population increases. And Labour’s intention to cut planning red tape will give construction companies a better chance to exploit this. The government thinks this will create 1.5m new homes over five years.

It’s possible that MJ Gleeson could perform better than the broader market, too. This is thanks to its focus on the affordable homes segment, where demand is especially high.

The 2.8% increase in Gleeson’s completions during the 12 months to June — a period when each of its major rivals struggled to sell — shows this theory in action.

A report from the National Housing Federation and Crisis suggests 145,000 new affordable properties are needed each year between now and 2031. Gleeson is in one of the box seats to capitalise on this opportunity.

Games Workshop Group

Games Workshop (LSE: GAW) is another top growth share I’d buy for the second half of 2024.

The tabletop gaming giant has the wind in its sails right now, and in June projected profits of at least £200m for the last financial year, ahead of forecasts. This impressive sales and earnings statement pushed the company’s share price sharply higher.

Things could get even better, too, if the business announces fresh details on the potentially blockbuster media agreement it has with Amazon. Plans are afoot to make film and TV content based on the UK firm’s highly popular Warhammer 40,000 gaming universe.

Games Workshop isn’t predicted to grow earnings as rapidly as MJ Gleeson in the near term. Rises of 7% are predicted for both of the next two financial years (to May 2025 and 2026).

But these numbers aren’t to be sniffed at. And given the company’s knack of publishing forecast-beating trading updates, I believe profits forecasts could well be upgraded over time.

Once concern I have is the high valuation attached to Games Workshop shares. Today they trade on a forward price-to-earnings (P/E) ratio of 22.7 times.

A reading like this can prompt a sharp price correction if investor sentiment suddenly darkens. Still, it’s my opinion that the FTSE 250 firm merits a premium valuation, and so it remains a great stock to consider right now.

The post 2 top growth shares I’d buy for the second half of 2024! appeared first on The Motley Fool UK.

Tasty recovery play

Shares in ingredients manufacturer and supplier Treatt (LSE: TET) have lost 36% of their value in the last 12 months. That seems a pretty big fall for a company that had been performing brilliantly for long-time holders.

The company’s valuation was beginning to look very rich in the face of multiple economic headwinds. So, perhaps we shouldn’t be surprised that Treatt has been walloped by the market.

Still, I’m beginning to think this share could bounce back well in time. Despite raw material inflation and industry de-stocking, revenue is still rising. FY23 profits are also expected to be 11% above FY22.

Elsewhere, the firm has been paying down debt and boasts a great record of rising dividends. Those are two things I always like to see.

The forthcoming retirement of CEO Daemmon Reeve after 11 years is a potential drawback. As a result, I’m adding this stock to my watchlist until an update on his successor is provided.

Already climbing

MJ Gleeson (LSE: GLE) is a second small-cap stock I think could recover strongly in time. In fact, shares in the housebuilder have already jumped 32% year-to-date as investors grow increasingly confident that interest rates have peaked.

I reckon this is just the start though. Assuming a recession can be avoided (a key risk here), the company is likely to see more demand for the small, affordable starter homes that it builds in the North and the Midlands.

This tallies with Gleeson’s comment last week that a “more certain backdrop” means it expects demand to “pick up into the seasonally stronger spring selling season“.

In the meantime, the balance sheet looks strong. There’s also a decent 3.2% dividend yield that’s likely to be covered more than twice by profit. Naturally though, it goes without saying that this income can never be guaranteed.

Good outlook

Former high-flyer Mortgage Advice Bureau (LSE: MAB1) completes the trio of small-cap stocks that I’m considering.

Back in September, CEO Peter Brodnicki reflected on “an exceptionally challenging year” with multiple interest rate hikes creating huge problems for mortgage brokers. On a more positive note, he also said that the company had still managed to outperform its market.

Looking ahead, the Derby-based business believes the “underlying level of demand for home ownership and home moves remains strong“.

All this may help to explain why the share price has been moving upwards ever since. A 22% rise in the last month is particularly encouraging, even if the shares may still be some way off the 52-week high hit back in May.

My main concern here, however, is the valuation. Changing hands for 24 times forecast FY23 earnings, the shares are far from cheap. So there could be some more volatility ahead if rate cuts take longer than expected to materialise.

That’s when it may be the time for me to consider building a stake here.

The post 3 FTSE shares I’d consider buying for a massive market bounce-back in 2024 appeared first on The Motley Fool UK.

[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]

Antofagasta 

What it does: Antofagasta is a FTSE 100 mining stock that owns a string of copper projects in northern and central Chile. 

By Royston Wild. I think copper prices could rise in the weeks and months ahead, pulling share prices across the mining complex higher. Antofagasta (LSE:ANTO) is a UK stock I’d buy to capitalise on this scenario. 

Copper demand from major consumer China remains solid and should remain robust as the country’s central bank steps in to support the economy. Meanwhile, production of the bellwether commodity remains mixed and scrap markets are tight.  

Copper stocks at the London Metal Exchange are already alarmingly low and dropped to levels not seen since late 2021. Such tightness bodes well for prices during the second half of the year. 

I’d buy Antofagasta shares to benefit from any near-term boost to metal prices — and I’d aim to hold onto them for the long haul. I expect demand for its essential product to rise strongly as renewable energy investment heats up and electric vehicle sales steadily increase. 

Royston Wild does not own shares in Antofagasta. 

HSBC

What it does: HSBC is one of the world’s largest banks, with operations in over 60 countries.  

By Charlie Keough. It’s been a strong year for the HSBC (LSE: HSBA) share price, up around 20% as I write. And I expect this to continue. 

My main attraction to the bank is its global diversification. It operates in a host of regions, with a large proportion of its profits generated from Asia. This makes the business less prone to country-specific issues, such as inflationary pressures in the UK.  

An additional attraction to HSBC is its dividend yield. The stock currently offers a yield of 4.8%, sitting above the FTSE 100 average. To add to this, it also looks cheap, with a price-to-earnings ratio of just 7.  

Although a benefit, the bank’s global exposure could be cause for concern. And with nations such as China posing a threat with ongoing geopolitical tensions, this could hinder HSBC’s operations.  

However, I think the opportunities that the firm’s emphasis on Asia offers in the long term outweigh any potential short-term concerns. As such, HSBC is my pick for August.  

Charlie Keough does not own shares in HSBC.  

MJ Gleeson

What it does: Sheffield-based MJ Gleeson builds homes and promotes land through the planning system for residential development

By Paul Summers: The best time to buy shares is often when most people won’t. As insultingly simple as that sounds, this is why I think MJ Gleeson (LSE: GLE) is worth a look.

A toxic combination of rising interest rates and the cost-of-living squeeze has sent the shares down nearly 20% in the last year.

Of course, there could be worse to come. However, the small-cap’s focus on affordable housing in the North of England and the Midlands could be its saving grace. 

Since the need for new homes won’t disappear, MJ Gleeson might see more resilient demand than its more luxury-focused peers. In fact, any chinks of light could see the stock soar in value given that a recession appears priced-in. 

Although the income can never be guaranteed, there’s also a secure-looking 3.3% dividend yield to keep investors patient until sentiment recovers. 

Paul Summers does not own shares in MJ Gleeson.

Scottish Mortgage Investment Trust

What it does: Scottish Mortgage invests globally in high-growth companies across both public and private markets.

By Ben McPoland. I think the macroeconomic picture is starting to look better for Scottish Mortgage Investment Trust (LSE: SMT). Inflation is finally cooling and we might be nearing the end of the rate hiking cycle.

Indeed, interest rates might even start to come down next year, which would be a bullish development for the sort of high-growth stocks that the trust holds. 

Not that any of this optimism is currently reflected in Scottish Mortgage shares. As I write, they’re still trading on a net asset value (NAV) discount of 19%. Clearly the market is yet to be convinced, which is a concern.

Yet I can’t help thinking this presents an opportunity for long-term investors. I mean, the trust’s portfolio is packed with companies at the forefront of artificial intelligence (AI). From Nvidia and ASML to Amazon and ByteDance (owner of TikTok).

Where else am I going to get discounted exposure to this revolutionary theme right now? Not many places, it seems, except with this trust.

If I didn’t already own so many shares, I’d buy more now.

Ben McPoland owns shares in ASML, Nvidia and Scottish Mortgage Investment Trust.

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That said, there are actually many smaller, less well-known businesses out there that also return healthy amounts of cash.

Here are two examples, either of which I’d be willing to buy so long as my portfolio was already sufficiently diversified.

Market minnow

With a market capitalisation of around £270m, it’s perhaps no surprise that housebuilder MJ Gleeson (LSE: GLE) doesn’t attract as many headlines as its sector heavyweights in the FTSE 100.

However, I reckon the market’s current aversion to any player in this space could offer an opportunity to long-term-focused Foolish investors like me.

As things stand, MJ Gleeson’s stock trades on a price-to-earnings (P/E) ratio of 11. Importantly, this is after taking into account analysts’ projections that earnings will halve in the current financial year.

They may not be wrong. After all, getting a mortgage is a lot more expensive than it was this time last year, and inflation is still at multi-decade highs.

Even so, this month’s half-year report contained some green shoots.

Strong investment case

Yes, pre-tax profit in the second half of 2022 fell to £16.1m, compared to £24.7m in 2021. However, the company said that net reservations were now “starting to recover“. Indeed, they had doubled from the low levels seen before Christmas in the four weeks to results day.

All told, MJ Gleeson now expects to deliver somewhere between 1650 and 1850 homes in the current financial year. New CEO Graham Prothero is also looking to save £4m annually by making the company “more operationally efficient“.

And the cash returns? Right now, MJ Gleeson offers a forecast dividend yield of 3.1%. That’s not massive compared to top-tier peers. However, it does look more secure (covered almost three times by profit).

Investors might also argue that this company’s small-cap status means the recovery in the share price could be more substantial.

Picks and shovels play

If investing in a single housebuilder feels too risky, another option for me would be Brickability (LSE: BRCK). This this business, of course, supplies bricks (and also rain-screen cladding systems, masonry, paving, roof tiles and slates) to the construction industry.

As with MJ Gleeson, Brickability’s shares have been pummeled over the last year. This is despite trading remaining fairly resilient.

Having “continued to deliver a strong performance across all of its business divisions“, the small-cap expects to report adjusted earnings of “at least” £47m for the full year to the end of March. This would beat analysts’ earlier expectations of £44.7m.

Still cheap

Naturally, the market lapped up this news with shares soaring by over 20%. Even so, Brickability shares continue to look dirt cheap on a price-to-earnings (P/E) ratio of just six.

That valuation looks tempting to me, especially as I’m being paid to wait for a recovery in the property sector.

A total dividend of 3.3p per share is expected for FY23, easily covered by profit. At today’s price, that would equate to a yield of 4.9%.

Again, factor in the possibility of a sizeable capital gain on top of this once the housing market recovers, and I think there are a lot worse places to park my cash in 2023.

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Zaven Boyrazian: Oxford Biomedica

Oxford Biomedica (LSE:OXB) is a biotech company that established a proprietary drug development platform called LentiVector. Using this technology, larger pharmaceutical companies like Bristol Myers Squibb and Novartis can pursue new treatments that would otherwise be  considered too expensive or technically challenging.

More recently, it has been put in charge of producing AstraZeneca’s Covid-19 vaccine. Earlier this month, the contract was expanded, roughly doubling the expected income in the process.

The contract alone could be worth £100m, potentially doubling the firm’s revenue stream. However, with a large bulk of income originating from a single source, there’s always the risk of revenue being compromised in the future. But Personally, I think the potential returns are worth the risk.

Zaven Boyrazian owns shares in Oxford Biomedica. His mother is an employee involved with clinical trials for Bristol Myers Squibb.

Rupert Hargreaves: TI Fluid Systems

TI Fluid Systems (LSE: TIFS) manufactures fluid storage, carrying, delivery and thermal management systems for light vehicles. The pandemic has impacted its sales, but the business is now well on the way to recovery.

Revenues increased 14.2% in constant currency during the first quarter of 2021. Based on this growth, management is expecting free cash flow to return to pre-covid levels this year.

Of course, this is not guaranteed. Another economic slowdown or decline in vehicle production could hurt demand for the company’s products. Still, I would buy the stock as a way to invest in the global economic recovery in the months ahead.

Rupert Hargreaves does not own shares in TI Fluid Systems.

Edward Sheldon: Smith & Nephew

My top stock for July is Smith & Nephew (LSE: SN). It’s a medical technology company that specialises in joint replacement systems.

I’m bullish on Smith & Nephew for two main reasons. The first is that the stock is a ‘reopening’ play. This year, profits should get a boost as elective medical procedures are resumed.

The second reason I like SN is that the company is well placed to benefit from the world’s ageing population. An increase in the number of over-60s globally in the years ahead should boost demand for its products.

Smith & Nephew’s valuation is higher than that of the average FTSE 100 stock. This is a risk to consider. Overall, however, the stock’s risk/reward profile is attractive, in my view.

Edward Sheldon owns shares in Smith & Nephew

Paul Summers: Motorpoint Group

Car retailer Motorpoint (LSE: MOTR) could prove a lucrative medium-term hold. Trading has accelerated in recent months as branches have reopened and UK drivers have been spending their lockdown savings. A global shortage of semi-conductors for new vehicles should support this demand for nearly new cars for a while. 

The shares already hit a record high in June, perhaps in preparation for good news. Still, a forecast P/E of 22 (at the time of writing) isn’t too steep in my opinion. Motorpoint generates consistently superb returns on the money invested in the business – something I always look for. 

Paul Summers has no position in Motorpoint Group

Kirsteen Mackay: Tesco 

I think FTSE 100 stock Tesco (LSE:TSCO) is one to watch in July. With Morrisons rejecting a takeover bid, I think it shines a spotlight on supermarket stocks. Tesco offers a 4% dividend yield, a forward price-to-earnings ratio of 12.6 and its share price is at the low end of analyst expectations.  

Tesco’s Q1 earnings show signs of growth. Group retail sales came in at £13.3m, this was up 8.1% on a 2-year-period and 1-year up 1%. Tesco does have a high level of debt. But I think it has staying power thanks to its extensive consumer data generated by its Clubcard. 

Kirsteen Mackay has no position in Tesco.

Christopher Ruane:  S4 Capital

I remain bullish about S4 Capital (LSE: SFOR), the digital advertising agency network.

Early in June, the company chairman hinted that it would reveal news of a couple of acquisitions later in July. The company is highly acquisitive and such announcements tend to attract investor attention. On top of its increased growth forecasts for the year, I think that could provide a July boost to the S4 Capital share price.

Acquisitions cost, though, and there is a risk of share dilutions to help fund the purchases.

Christopher Ruane owns shares in S4 Capital.

Royston Wild: MJ Gleeson 

The British housing market remains in rude health despite the Covid-19 crisis. And this has led to sharp price increases for UK housebuilding shares. Take MJ Gleeson (LSE: GLE) for instance. This small cap has risen an impressive 29% in value during the past 12 months. 

Yet at current prices I think MJ Gleeson’s share price remains mightily cheap. It commands a forward price-to-earnings growth (PEG) ratio of 0.8, below the bargain-basement benchmark of 1. I think the release of fresh financials on 9 July remind the market of its terrific profits outlook and prompt fresh buying interest from value seekers. Last time it updated the market in May MJ Gleeson predicted that earnings for the full year would be ahead of market expectations thanks to “strong demand for new homes.” 

Royston Wild does not own shares in MJ Gleeson.

Roland Head: Airtel Africa

I’ve chosen African mobile operator and payments group Airtel Africa (LSE: AAF) as my top stock for July. This FTSE 250 firm recently reported 25% profit growth for the year to 31 March, but still offers a 5% dividend yield.

I’m excited by the long-term growth potential of the company’s African markets, which I think should outperform the mature telecoms markets of western Europe and the US.

Although I think that investing in Africa carries some extra political and operational risks, I reckon Airtel Africa shares are cheap enough to reflect this. I’ve recently bought the stock for my portfolio.

Roland Head owns shares of Airtel Africa

Kevin Godbold: Britvic

Branded soft drinks company Britvic (LSE: BVIC) delivered a positive outlook statement in May. The firm saw “encouraging” sales in the second half to 31 March because of the easing of lockdowns. And the directors are increasing re-investment into the business to “capitalise on near-term market opportunities and drive long-term growth.”

Britvic scores well against quality indicators. And trading is improving. Although a positive investment outcome isn’t certain, I’m tempted to buy the stock for July and beyond despite the full-looking valuation. Near 943p, the forward-looking earnings multiple is just above 16 for the trading year to September 2022.

Kevin Godbold does not own shares in Britvic.

Nadia Yaqub: BT

I’ve recently turned bullish on BT (LSE: BT-A). A few weeks ago, the company announced that billionaire, Patrick Drahi through his firm, Altice took a 12% stake. This investor has a wealth of experience and I reckon it could be a turning point for BT.

But the UK firm isn’t without its problems. It has a significant amount of debt and a sizeable pension deficit. For me, the main thing is that it has a plan. BT has stated that it remains on track for a zero funding deficit by 2030. I reckon things look promising for the company.

Nadia Yaqub does not own shares in BT

G A Chester: Fresnillo 

A share-price decline of 27% makes silver and gold miner Fresnillo (LSE: FRES) the FTSE 100’s worst performer so far this year. It’s also in the red on a one-year view. Volatile precious metals prices and operational risk come with the territory, but I think the stock currently offers me a margin of safety and great value. 

Analysts are forecasting earnings growth of 80% for 2021 and a 40% dividend increase. A P/E of 14 is low by the company’s historical standards, a PEG of 0.2 is in the bargain basement, and a historically high dividend yield of 3.2% adds to the appeal for me. 

G A Chester has no position in Fresnillo.

Tom Rodgers: Rolls-Royce

News that FTSE 100-listed engine manufacturer and defence contractor Rolls-Royce (LSE:RR) is selling off its Spanish subsidiary ITP Aero for around €1.5bn gives me confidence that this British brand can climb in July. That would give it the ability to pay down its admittedly huge debt pile and brighten its future prospects. The value on offer at these prices has also attracted broker Berenberg to forecast a near 50% target increase from here, and that’s the kind of re-rate that shows institutional confidence is returning for Rolls-Royce after an horrific couple of years.    

Tom Rodgers does not currently own shares in Rolls-Royce

Jonathan Smith: Aviva

Aviva (LSE:AV) is a well-known insurance provider. I like the fact that it’s transforming focus of business and putting more focus into the core UK operations. This was seen recently with the agreement to sell off Aviva France for €3.2bn.

This also helps to boost the cash position of the business, which should support future dividend payments. The current dividend yield of 5.06% looks attractive for income investors.

The Q1 update also highlighted the highest Q1 sales in the general insurance division for a decade. With this backdrop, Aviva is my top stock for July.

Jonathan Smith does not own shares in Aviva.

Andy Ross: ITV 

Shares in broadcaster ITV (LSE: ITV) could do well in July in the run up to its 2021 interim results, due out on the 28^th July.

Back in May, the broadcaster sounded relatively upbeat. ITV Studios revenue was recovering, a key driver of growth, as was advertising revenue.  

Content such as Saturday Night Takeaway and Six Nations rugby modestly boosted viewing numbers. I’m hoping the European Football Championships continues that trend.  

Further optimism from ITV executives when the results come out could I think really help the share price. However, of course there’s a risk the update could miss expectations or have a negative outlook, which would likely send the share price down.  

Andy Ross does not own shares in ITV.

Harshil Patel: Synthomer 

My top stock for July is chemicals company Synthomer (LSE:SYNT). It supplies polymers to several markets including carpets, and coatings.  

The company is experiencing strong trading momentum across all of its business areas. It recently highlighted a positive outlook and I think strong trading is likely to continue this year.  

Although uncertainty remains in the global economy, I believe Synthomer offers a reasonable margin of safety. 

Overall, I’d say the stock is pretty cheap. It trades at a price-to-earnings ratio of 10 and offers decent earnings growth. It has plenty of cash and even offers a dividend of over 3%.   

Harshil Patel does not own shares in Synthomer.

The post Top British stocks for July appeared first on The Motley Fool UK.

It’s possible that we could be on the cusp of a new bull market. And I for one am looking for top British companies to buy for my Stocks and Shares ISA today. Let me talk you through two cheap UK shares I’m thinking of adding to my shares portfolio for 2021:

A top UK share as house prices soar

Investors at MJ Gleeson (LSE: GLE) won’t have to wait long for exceptional profits growth. City boffins reckon annual earnings here will soar 402% in the current fiscal year ending June 2021. And as a consequence this UK share also trades on a low forward PEG ratio of 0.1.

It’s perhaps no great surprise that analysts are so bullish over the housebuilder’s earnings outlook. House prices in the UK are rising at their fastest rate for several years. And this small cap is opening sites at a record pace to capitalise on this fabulous trading landscape. It has opened 11 new building sites since the beginning of July and plans to have another 14 in operation by the end of the current fiscal year.

I believe that this UK share has all the tools to continue thriving too. On top of those encouraging build rates — it hopes to put up 2,000 new homes a year by the middle of 2022 — MJ Gleeson is making solid progress in lifting its prices in line with the broader market. Besides, the small cap can expect significant factors like low interest rates and government support via Help to Buy to keep buyer demand bubbling nicely well into the new decade.

That’s the spirit!

Profits at Stock Spirits Group (LSE: STCK) are also expected to rocket impressively this fiscal year. City experts reckon annual earnings will soar 104% in the 12 months to September 2021. This leaves it trading on a PEG ratio of 0.1. This UK share offers investors an added sweetener through its chunky 3.3% dividend yield too.

Stock Spirits sells the bulk of its vodka, brandy, and other drinks to the emerging markets of Central and Eastern Europe. It can expect demand for its products to keep rising too as wealth levels in these territories steadily grow. Its products also have the brand strength to overpower their rivals, too (its market share of the Polish vodka market sits at five-year highs around 32%).

And finally, Stock Spirits is the perfect buy for those fearful of a long and bumpy economic recovery in Europe. Manufacturers and retailers and alcohol are reliable profits generators during economic upturns and downturns. And this UK share’s latest financial update illustrates this point perfectly. Revenues here rose 6.9% in the fiscal year to September 2020 as volumes increased 1.8%. This was despite Covid-19 lockdowns hammering sales in the hospitality sector.

The post Top growth stocks! 2 cheap UK shares I’d buy in my ISA for 2021 appeared first on The Motley Fool UK.

The number of professional job vacancies in London has swelled 16.7% over the past year, says the Association of Professional Staffing Companies. This rise is in spite of the intense Brexit-related uncertainty that has dogged the UK economy in this time.

Double bubble

Particularly good news for PageGroup is that vacancies in key areas have rocketed recently. While vacancies rose in a number of sectors last year, the number of accountancy roles grew by the largest amount, up 59% year on year. This is a big deal for PageGroup as its Accounting and Financial Services division is its largest by gross profits. It sources more than a third of total profits here.

Other industry data in recent days has underlined the strength of the recruitment market, too. According to agency services provider Sonovate, there were a whopping 8,456 new job agencies created in 2019. This is up 230% from the 2,556 such companies that sprung up at the start of the decade.

Worry over a subdued British jobs market has weighed on the share prices of PageGroup and its peers of late. And so this pair of positive releases should give investors some confidence as we move into 2020, a year that threatens to be dominated by Brexit-linked tension too.

Safe as houses

A quick look at PageGroup’s valuations suggests that there’s scope for some handsome share price gains. Historically speaking, London-listed recruiters have traded at a chubby premium, reflecting their bright growth outlooks driven by international expansion. But right now this FTSE 250 firm trades on a forward price-to-earnings ratio of 14.1 times, comfortably below the UK blue-chip average of around 15 times.

If you’re on the hunt for great value you might want to consider buying shares in MJ Gleeson (LSE: GLE), too. The housebuilder’s share price has surged following the Conservative victory at last month’s general election, a development that gave some near-term certainty to the Brexit issue.

Some strong new year trading details from MJ Gleeson have also attracted investor interest of late. “Demand for our low-cost homes remains strong,” it said, adding that its Gleeson Homes division sold 811 units in the first fiscal half, up 17.4% year on year. Confirmation that conditions have remained rock solid when it unveils full-year financials on Thursday, 13 February, could help its stock to increase further in value.

At recent prices the small cap trades on a forward P/E ratio of 14.7 times. And expectations of more decent dividend growth in the fiscal year to June 2020 results in a fatty 3.7% yield. I’d happily buy this share along with PageGroup for my ISA today.

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I last wrote about Gleeson in a positive article in September 2018. Back then, the share price stood at 718p and the forward-looking dividend yield was just over 4%. I thought the share was “attractive.”

Good trading

Today, the share price is at 822p, but after initially rising, it dipped below 700p in June along the way. Such volatility is rife right now among traditionally cyclical stocks such as this one. Indeed, the political and macroeconomic scene makes the immediate outlook seem unclear for many firms.

But Gleeson delivered another set of impressive full-year results this morning, so maybe we shouldn’t worry too much. Revenue rose 27% compared to the prior year and earnings per share rose 10%. The directors signalled their satisfaction and optimism about the outlook by pushing up the total dividend for the year by 8%.

The report reveals to us that around 70% of profits in the year came from the Homes division and 30% from Strategic Land, making the firm’s low-cost home-building activities in the North of England very important to the firm. Volumes were up 25% in the year with the company selling 1,529 units.

And in more evidence that property prices have continued to rise, the average selling price was up almost 3% over last year, at £128,900. That strikes me as a high bar to jump over for new entrants to the property market but schemes such as the government’s Buy to Let are helping to keep things moving.

Indeed, the homes have been selling, and Gleeson increased its land pipeline by nearly 6% during the year to 13,575 plots. The firm’s goal is to sell 2,000 completed units a year by 2022 and it is “well on track” to achieve that, according to the directors.

No problems from Brexit

Meanwhile, the Strategic Land division, which operates in the South of England, saw an increase of just over 3% in operating profit and sold nine parcels of land in the period. There are 60 sites in the portfolio and the directors said in the report that they made the decision not to sell the Strategic Land division because keeping it offers “significantly greater long-term value to the Group than selling the business.”

Trading has been robust and profitable, it seems. But I must own up to being a little nervous about the immediate prospects for all property companies and house-builders at the moment. However, the chair, Dermot Gleeson, said in the report that demand is “extremely strong” despite the uncertainties hanging over us all because of the Brexit process.

The outlook is positive and the directors come across as bullish to me. Meanwhile, with the share price close to 822p, the forward-looking earnings multiple runs just above 12 for the current trading year to June 2020 and the anticipated dividend yield is a little below 4.4%. That valuation seems undemanding to me.

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Like many of its peers, the homebuilding business is experiencing surging demand right now. Last year, the company reported a 14% increase in earnings per share across the group, and this year analysts have pencilled in a smaller, but still attractive 8.4% increase in profits for the year. And it looks as if Gleeson is well on the way to meeting this target.

Positive trading

It today updated investors on its trading for the financial year ended 30 June, ahead of full-year results, which will be released in mid-September.

According to the update, over the past 12 months the homebuilding division, Gleeson Homes has “delivered its largest annual volume growth selling 1,529 homes during the year, a 25% increase compared with the previous year’s total.“

It doesn’t look as if this division is going to slow down any time soon. Gleeson Homes is currently active on 69 building sites and anticipating an increase to 80 or more sites during the coming year, the trading update reports. Management reckons this business is “comfortably on track” to meet its stated volume target of 2,000 homes per year by 2022. The strategic land business is also seeing strong demand for its services. Overall, management believes Gleeson will “comfortably” meet City growth expectations for the year.

Looking at this growth, I think the stock is currently undervalued as it is dealing at a forward P/E of just 12.3. It also supports a dividend yield of 4.6%. With earnings per share set to increase by nearly 20% between now and 2020, I think a mid-teens earnings multiple might be more appropriate for the business. A net cash balance of £30m also leads me to conclude that the market is currently undervaluing this stock.

London-centric

Another property stock that I like the look of right now is Great Portland Estates (LSE: GPOR).

Over the past few months, shares in this London-focused real estate investment trust have drifted lower and are now trading significantly below its latest reported net asset value. Indeed, at the end of May, the company reported a net asset value per share of 853p, 22% above the current price of 700p.

It is difficult to see why investors are giving this company such a wide berth. It would make sense if the business were suffering from falling rents and rising vacancy levels, but it isn’t.

According to a trading update from the trust today, at the end of June, the company’s vacancy rate was just 4.2%, down from 4.8% at the end of March. Meanwhile, the property business has managed to increase its rent roll, settling seven rent reviews during the second quarter with an average uplift of 17.2%. Great Portland also signed nine new lettings and has 12 more under offer with a total potential income of nearly £5m.

These figures tell me that despite the market’s ambivalence towards Great Portland, the underlying business is still powering ahead, and that’s why I think this undervalued property champion could be a great addition to your portfolio.

The post Have £5k to invest? I’d buy these two undervalued property stocks appeared first on The Motley Fool UK.

Another brilliant builder that’s on my radar is MJ Gleeson (LSE: GLE), and particularly so with new trading details just around the corner on July 4.

The resignation of Jolyon Harrison as chief executive this month, prompted by a row over the size of his paypacket, has really shaken investors. The company’s share price has fallen by almost a fifth in June, a re-rating which suggests a gross overreaction by market makers.

For one, the small-cap is replacing Harrison with a safe pair of hands in former head of Keepmoat Homes, James Thomson, someone who will keep things afloat in the immediate term at least.

Secondly, Gleeson is not as dependent upon their ex-leader as it was during the company’s upscaling programme of a few years back. And thirdly, because of the UK’s gigantic shortage of new homes, the long-term profits outlook for the business remains a compelling one.

Sales are booming

I’m fully expecting Gleeson to remind the market of this when it comes to releasing those fresh financials, something which could well prompt a heavy share price rebound. It certainly impressed last time out in February when it advised revenues boomed 53% in the six months to December, to £118.3m. That upswing was driven by a double-digit rise in unit sales and an increase in average selling prices.

I tipped Gleeson’s share price to jump in the run-up to those half-year numbers and I’m expecting nothing less this time around either. Indeed, the steady stream of positive updates from across the homebuilding sector reinforces my expectations that there’s been no change in those favourable trading conditions.

I’d buy today and never sell

With or without its veteran chief executive, City analysts certainly don’t see Gleeson’s long record of chunky annual earnings growth being blown off course any time soon.

They’re anticipating an 11% bottom-line improvement for the year about to start (to June 2020), following on from another double-digit-percentage rise in the period that’s about to expire. And this means dividends are expected to keep rising too, resulting in a jumbo 5% yield for the forthcoming period.

Gleeson clearly isn’t a share for the here and now. Its efforts to turbocharge build rates puts it in the box seat to ride the homes shortage that’s driving newbuild sales. In my opinion, it’s a great share to buy today and hold for many years to come.

The post Have £5k to spend? A ‘forever’ dividend stock that I’d buy before July appeared first on The Motley Fool UK.