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I think you may be missing a trick strictly by not paying much attention to the chart. At the end of the day the only way to bank a profit in this game is by buying low and selling high, and the chart is a bloody good guide of what high and what’s low.
Strictly,
I’ll buy anything at the right price, but at over 9 quid a pop, I wouldn’t touch Vistry with a barge pole.
I don’t have anything against Redrow, I’m just mindful that the markets are very fickle, so I don’t like to pay £5. when the chart suggests there may be an opportunity to buy at 430-450ish in the near future.
Having had my fingers burnt in PSN, I only buy bargain stocks that I really feel compelled to buy. If I feel it could go either way, I’m just not interested. So I have a strict checklist before I buy any stock, and it must meet all of the following:
1. Be in an industry I understand
2. Be at a low price it has previously bounced from
3. Be profitable, not burning cash
4. I don’t pay any more than 80% of tangible book value
At present Redrow fails point 2 of my checklist, and is at risk of revisiting 430ish should the sentiment change.
I know I’ve been banging the drum on this for a while, but nothing comes close to the value of Crest. It’s the only HB institutions have bought of late (unless I’m mistaken?) and it always sees the daily biggest bounce on positive macro news.
£4.28 to be precise would be my buy in for RDW, £5.50 for Vistry.
Strictly,
I’m not surprised. Vistry and Redrow have been very much “in fashion” this week, hence the high prices. I prefer to buy stocks when they aren’t “in fashion” and prices are at rock bottom, Hence I put most of my portfolio in crest (at 172) the day they issued revised profit guidance. Of course, if the noise is to be something to be concerned about, then I’m cautious, but let’s be honest, a trough £50m earnings against a sub £500m market cap company isn’t to be sniffed at, particularly when the tangible book value is twice the share price.
I note your previous comments about Redrow, and it is very much pencilled in on my watchlist as a buy if the chart pattern continues and I can get in at 4 quid a share.
Personally I’m short on Vistry & Redrow, as a hedge against my long position on Crest.
Vistry is trading ridiculously high in comparison to other HB’s. Redrow doesn’t look overpriced, but will probably fall from this level if the chart pattern continues (and if inflation data is unfavourable next week). Crest has quite a lot of ground to make up in its recovery since Liz truss, and is undoubtedly the best value in PBV terms by quite some margin against any other HB.
Will be interesting to see what the inflation data brings next week. If it’s good news, I’ll get stung a little on my short positions, but crest will benefit the most, just as it did back in July having bounced 21% in just 4 days. Plus it goes ex divi the day after, so I think I’m on to an overall winner either way.
Time will tell…
I’m not wrong Steve, but you are, again. Inflation data is on the 20th. The BoE meet on the 21st.
Wrong again Steve. That’s on the 20th.
This has some way to fall yet once investors realise the suspension has been lifted. Only 12% down when it just lost 3x the market cap.
Steve, the bottom last month was briefly 168, and 170. I got in at 172 because that was the bottom in October 2022. Shares have a habit from bouncing from previous lows. Anyway, I’m in at 50% of book value so no concerns to hold long term. Just shows how low PSN could go though. Don’t think just because it’s slightly under book just now that it won’t go any lower…
Steve, you really do talk some Sh*te.
There’s not a single housebuilder in the land with a 50% NAV that could possibly go bust, unless it was so highly leveraged that a slight drop in house prices wiped out the equity.
For the record, I’m not underwater in CRST, I’m in profit having gone in big at 172. But yes, I did take a loss on PSN having sold just below £12.
The Share price would need to drop to about £5.50 to be as good value as Crest Nicholson in terms to price to book value.
Although, as strictly bricks has pointed out PSN has better return on equity so £7 would put it on a par with crest in terms of value.
Strictly,
But, as CRST is trading at almost half the equity on the balance sheet, then the return on market cap would be double the return on equity, so can’t we accept a “poorer” return on equity for CRST, being as half that equity was free anyway?
I hope I’m making sense, but I would only look at return on the equity I’ve paid for rather that the equity I got for free when I bought my shares.
Enjoy your pie.
Strictly
I always find your posts interesting and informative, but I’m a numbers guy.
What numbers specifically suggest BWY has superior performance?
Strictly,
I get what you’re saying, but then I think about what happens when times get sticky (as they are) and those expectations aren’t met? That’s why for me strength in balance sheet is key.
I guess we’ll see a TU from BWY in the next couple of weeks? It will almost certainly reflect the tone of CRST. Is that not of concern to you, particularly when there’s an expectation of superior performance, priced in to make up for the weaker PBV?
CRST is projecting £50m profit against a £436m market cap, giving a trough p/e of 8.7. Not too shabby really all things considered.
To be comparable to that, BWY would need to be projecting £280m against its £2.44b market cap, or if you factor in that the PBV is approx 40% higher, then BWY would need to be projecting £392m profit to justify its higher valuation (against its PBV). Let’s be honest here, it’s not going to happen. Which would suggest a bigger SP clobbering that CRST had.
Note, all figures are taken from Yahoo finance so I’m not sure if they reflect todays rise in SP for both companies.
Strictly,
A few points I find with BWY:
Currently trading at a 27% premium to last September (CRST is still trading similar to the lows of the same period). That worries me in these uncertain times because I always think it could revisit previous lows, just as CRST did when the TU came out last week. One would expect all HB’s face the same market conditions, so their TU will likely have a similar effect on SP, whereas with CRST, the worst is (more than) priced in.
Moving forward, I can’t really compare profitability because BWY hasn’t given a recent trading update, although as I say, one would expect it to be of a similar tone to that delivered by CRST.
PBV as of today for CRST 0.54x vs 0.72x for BWY
As far as I’m aware, CRST is the only HB institutions are buying of late looking at the RNS’s which is rather telling.
Personally, I’m looking to sell out of CRST when it’s trading closer to its rivals in (PBV terms) at 0.75x, which would be £2.56 SP, although I’ll probably set my holdings to sell out just below £2.50.
Look forward to hearing your views…
Source: https://www.sharecast.com/amp/news/broker-recommendations/berenberg-on-crest-nicholson--14529798.html
Shares in Crest Nicholson were performing strongly on Tuesday as the housebuilder attempts to recover after a profit warning last week which tanked the stock price, with broker Berenberg lifting sentiment after reiterating its 'buy' rating.
The broker pointed out that the stock is trading at just 12x trough EPS, and 0.5x tangible net asset value.
"This leaves the group, even on significantly downgraded forecasts, as the most lowly rated housebuilder in the peer group, and we think this asset-backed valuation is very compelling," said analyst Harry Goad.
"It is on account of this valuation support that we keep our 'buy' rating."
In an unscheduled trading update on 21 August, Crest Nicholson said it had seen a marked deterioration in sales rates over the past seven weeks, with 0.25 houses sold per site per week, down from 0.5 a year earlier.
Profit before tax is now expected to come in at £50m for the financial year ending 31 October, a 30% cut on previous guidance and down from £138m the previous year.
The downgrade to forecasts means Berenberg has cut its target price from 310p to 250p.
"While we acknowledge the company’s comment that higher mortgage rates have affected customer demand, we are nevertheless surprised by the extent of the change in outlook and guidance, which stands out as more marked than peers," Goad said.
"With hindsight it appears the management assumptions for what it could achieve in its H2 were far too optimistic."
“Crest could liquidate the entire company tomorrow as far as I’m concerned providing they could get at least book for it, and hand out the dosh as a final div to the investors next week”
Strictly, you got that bang on there. This is why CRST is my only house builder share. It’s got to be a takeover target from one of the bigger HB’s.
PSN (and a few other of the bigger HB’s) could buy CRST out at a 50% premium over the current SP and still get a 25% discount on the book value of its assets.
I’m curious to know why you see BWY worthy of a bigger investment that CRST?
I’ve been saying this for a while and it seems the experts are in agreement:
Berenberg on Tuesday said it retains its 'buy' rating on Crest Nicholson as despite the "disappointment" of a large profit warning from the housebuilder, it still thinks the group's "asset-backed valuation" is the "most compelling" in the sector.
CRST Current PBV is 0.5x vs PSN’s Current PBV of 0.94x
Dividend yield is better too.
Source: Yahoo finance
Manz, what’s a 7% divi when you can get 6% risk free without watching your capital diminish everyday?