Among key trends like the growth in technology, the biosciences and the global consumer society, another to add is the worldwide boom in property.
In most countries house prices are rising, and Britain is no exception. During the Credit Crunch, property firms like Barratt Developments (LSE: BDEV), Rightmove (LSE: RMV) and Persimmon (LSE: PSN) took a beating.
But since then with a strengthening recovery in the British economy, they’ve come back strongly. House prices are rising, the number of transactions is increasing, and so house builder shares are climbing. A growing population and an increasing number of people with jobs and money to spend add to the momentum in this sector.
So here are my three picks to ride the property boom. Let’s take each one in turn…
Barratt Developments
I remember calling out Barratt as a buy in the dark days of the Eurozone crisis way back in 2011. Back then the stock was, remarkably, priced at around 70p. Today it has risen to 577p. I’m still kicking myself for not buying-in at this bargain price.
Those figures show just how far this company, and indeed this country, have come. And yet the current share price is off its highs, and this business still, amazingly, looks cheap.
The 2016 P/E ratio is just 10.92, with a dividend yield of 5.2%. These fundamentals show the housebuilder’s appeal: it’s cheap, growing earnings, and pays a high income. That’s why it could well be worth investing in.
Rightmove
Rightmove connects people to properties. It runs the country’s leading website, and is a company that’s set fair for the future. If I want to find a property to buy or rent, I’ll always check the Rightmove website.
That’s why share prices in this firm have only been going in one direction. And EPS has been roaring ahead, jumping from 72.61p in 2013 to an estimated 151.67p in 2017. That’s a rapid pace of growth and if this can continue, then the share price is likely to push even further ahead.
The 2016 P/E ratio, at 31.75, shows that this company is highly rated, but I think this is justified given Rightmove’s bright prospects.
Persimmon
Housebuilder Persimmon is another firm that went through the wars during the Great Recession, but bought up cheap land during these lean times and has now emerged stronger and highly profitable. It owns premium brands like Westbury, and is set to benefit as the UK’s housing market further strengthens.
It’s hard to believe that the share price fell to 215p in 2008, but has now climbed to 2,061p – that’s a nearly tenfold increase! This is what happens you buy into the right side of a cycle.
But if you check the fundamentals, Persimmon still offers value, with a 2016 P/E ratio of 10.85, and a dividend yield of 5.31%. Just like Barratt Developments, this company is cheap, fast-growing, and pays a tidy income. It provides another option for your portfolio of UK shares.