From risk on….
The stock market is an interesting beast, be that bull or bear it plays on our emotions and behavioural biases, which can make most of us, not to mention professional investors, look like monkeys from time to time.
Indeed, before the bank holiday everything was looking rosy. The polls were pointing to the UK remaining in the single market, oil was on a march higher, and in general the market was in a positive mood.
 ….to risk off
Just three days later and the mood of Mr Market started to swing in a more southerly direction. A combination of increasing uncertainty in the result of the upcoming EU referendum, the continued volatility of Sterling, and Brent crude dipping below the psychologically important $50 per barrel, helped to see the FTSE 100 close lower for the second day in a row at 6,191, albeit off its intraday lows.
Despite the renewed doom and gloom there have been some bright spots over the last month, which, in my view are worthy of note.
Safe as houses?
As we can see from the chart, it wasn’t just stocks exposed to the rising oil price that saw their share prices rise since the start of May. Indeed, like many other housebuilders, Taylor Wimpey (LSE: TW), Bovis Homes (LSE: BVS) and Bellway (LSE: BWY) all beat the market by double-digits – until today when the fear of a Brexit, or more to the point the ramifications of a Brexit, struck their share prices again yesterday.
However, as I’ve written before it’s important for investors to cut through the noise and focus on the actual investment – not the continual news flow that can cause even the best of investors to lose their focus from time to time.
While I would be the first to accept that retaining your focus in times like these is much, much harder in practice, investors in my view should look at the news flow from the companies themselves.
In fact, the news flow has been nothing but positive with the general view that the UK new-build housing market remaining very positive across most of the UK, with a healthy and controlled lending environment providing good accessibility to mortgages at competitive rates.
Indeed, consumer demand and confidence remain high, and in central London (an EU result-sensitive market), the trading environment continues to be stable.
For those that have mentioned the dreaded ‘B’ (Brexit) word, it’s only to highlight that it has had no discernible impact on trading.
Cash in the attic
With trading continuing in line with expectations (despite what could happen on or after 23 June) management at these firms seem to have learned their lessons from the 2008 financial crisis. They continue to focus the businesses on sustainable growth while returning excess cash to shareholders via double-digit dividend increases or special dividends, meaning that despite what you may read in the general press, these shares are definitely worthy of further consideration.