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The monthly magazine providing news analysis and professional research for the discerning private investor/landlord

A Strong Third Quarter For The PIN Fund

Peter Hemple reviews our fictional fund of property related shares in Q3 2019

All five of the housebuilders in our Fund returned double digits in Q3 2019 (up to 22nd of September), which was far better than the fall of 2.2% for the FTSE 100 during the same timeframe.

The best performer by quite a margin was Bellway, which including the 50p dividend in Q3 managed to return 20% in less than 12 weeks. During the past five years, Bellway has achieved compound earnings per share (EPS) growth of 30% per year. It is still the smallest housebuilder in our Fund and the only one that is not on the FTSE 100, with a market cap of just under £4bn. It also has a reasonably low price-to-earnings (P/E) ratio of 7.6, at the time of writing, so it is clearly not a favourite among investors, which makes a fall from grace unlikely at the moment.

Brexit-related risks are putting many investors off from buying housebuilder shares at the moment and Q4 2019 will reveal whether that has been a wise decision or not. But Bellway has reported healthy figures this year and the recent global move in interest rates (with many countries lowering rates even further and the US reversing direction) is good news for housebuilders.

Taylor Wimpey’s share price fell in August but its half-year results released on 31 July showed that demand for its new homes has been robust in recent months, with government policies such as Help to Buy and low interest rates making the property market more affordable for first-time buyers.

The bigger risk for housebuilders, yes even bigger than Brexit, could be a surprise result in the general election as a change of government may decide to scrap the Help to Buy scheme with immediate effect, a decision that would no doubt send the housebuilding shares into a tail spin.

However, as with Bellway, the P/E ratio is low for Taylor Wimpey at just 8.0 and despite the share price increasing by almost 12% in Q3, at the current share price total dividends this year will equate to around 11%.

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