The current travails of Greece, and in particular the parlous state of its public finances, dominated market sentiment today. The FTSE100 fell by 2% to 6,620, while European bourses (both equity and bond markets) fell further and, on the foreign exchange market, the Euro currency lost ground. The question both traders and investors will be asking themselves is, "Does this setback provide a buying opportunity, or not?"
"Today's announcement of procuring planning permission for 351 homes on the former Meridian TV studios in Southampton represents another positive 'brick in the wall' (please excuse the pun) for Inland Homes. Project value of £70m, this underpins the asset value highlighted in 17 June blog. By contrast with other listed house builders, the book value of INL stock appears very attractive with true worth (based on current value of its land in the south of England, much of it consented) in the region of 85p per share. The share price to book valuation (P/B) of the peer group is typically in excess of 2x (based on net tangible assets advised on last reported balance sheet). While a historic earnings based valuation would show the larger premium listed builders in a better light, profits from INL appear set to surprise on the upside and projecting forward to estimate profits in 2016 would suggest that both INL and the builders at large are on 11.8 times consensus forecasts.
Sensible private investors in equity will no doubt have a diversified portfolio of collective investment vehicles and company shares, but within the latter they may well be inclined towards a few favourites. All individual stocks, however apparently successful, must have a price at which the prudent intelligent owner would consider them as being overvalued and would decide to sell.
The mega cap end of the UK equity market, as measured by the FTSE100 index, has given up much of the gains made in the year to date as concerns surrounding Greece and the prospect of higher interest rates in the US have dampened our local post-election euphoria. By contrast, the mid cap FTSE250 index has retained most of its 2015 advance, reflecting in part superior earnings growth and, more pertinently perhaps, an inherent higher exposure to the domestic economy.
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