Builders rise as brokers bet on house price hikes
ANALYSTS at broker Jefferies sent housebuilders higher yesterday after reiterating their faith in the sector despite a spate of bosses appearing to call the top of the market.
Builders have been in decline over recent weeks, with directors at Redrow, Cairn and Berkeley
Group scaring off investors by dumping more than £200m worth of their own shares.
But the self-professed nerds at Jefferies believe the dip in sentiment and profit-taking actually presents an ideal buying opportunity in the sector.
In a note casting themselves as David versus Goliath, analysts said investors are wrongly concerned about declining housing transactions, slowing house price inflation and UK interest rate rises.
they said the belief that rising rates will hit house prices and in turn housebuilding shares is untrue, and even argued that house prices are more likely to rise over the next year due to high levels of mortgage availability.
they said: ‘Between December 2006 and August 2007, house prices increased by 8pc, although over the same period the value of UK housebuilder shares fell by more than 20pc.’
Biblical analogies aside, the broker said attractive returns can be made by those who invest in the housebuilding market while it languishes, naming Taylor Wimpey and Bovis Homes as its top picks in the sector.
the news sent shares in taylor Wimpey up 1.4pc, or 2.6p, to 189.4p, while Bovis Homes rose 1.4pc, or 14p, to 1049p. the rest of the sector also flourished, with shares in
Barratt Developments up 1.6pc, or 9p, to 590p, while Persimmon rose 1.5pc, or 36p, to 2485p, and Redrow advanced 1.7pc, or 9.5p, to 560.5p. Cairn edged up 1.6pc, or 0.03p, to 1.74p, while Berkeley also nudged into the positive with a 1pc, or 25p, rise to 3515p.
the FTSE 100 continued its strong start to the week after last week’s poor performance, rising 0.3pc, or 21.97 points, to 7275.25.
It was helped along by the supermarket sector, which rose after figures from Kantar showed inflation boosted sales for major grocers over the summer.
Analysts at liberum got on board with struggling bus and rail firm Stagecoach, upgrading it to ‘hold’ from ‘sell’.
the analysts think risks which have hit stagecoach by 23.9pc this year, such as rising staff costs, charges in its East Coast rail franchise and terrorist attacks are fully factored into its share price.
It believes stagecoach could also manoeuvre a fresh deal for its struggling East Coast franchise, with network Rail looking unable to deliver extra capacity on the line from 2019, as previously promised. shares rose 2.4pc, or 3.8p, to 163p. Petra Diamonds lost its sparkle after reporting strikes at two of its mines in south Africa as it attempts to finalise wage negotiations with unions in the country.
the firm is experiencing disruption at its Finsch mine and Kimberley Ekapa Mining operations, and said it is currently assessing the impact on both sites.
Petra warned that there could be strike action in its results on Monday, where it also revealed that the government of tanzania is yet to return a huge parcel of diamonds which it is accuses the firm of undervaluing. shares fell 6pc, or 4.75p, to 74.5p. tool rental company Speedy
Hire jumped after reporting that cost cutting measures are likely to push full-year profits ‘well ahead’ of last year and beyond its board’s expectations.
the group, which has been touted as a suitor for struggling rival Hss, said it will save at least £3m a year from cutting its operating divisions and distribution centres. shares rose 1pc, or 0.5p, to 51.75p.