So far 2020 has been filled with doom and gloom, both in the markets and worldwide.
Therefore, it’s nice to read something positive for a change. Two FTSE 100 companies that announced good news this week are housebuilder Berkeley Group Holdings (LSE:BKG) and luxury goods giant Burberry (LSE:BRBY).
Shareholders rejoice!
Berkeley has proposed a capital return of £1bn to shareholders over the next two years. This comes as a little more certainty can be afforded to the UK housing market since the Conservative government won the December election.
The past few years have created a volatile operating environment for housebuilders. Berkeley has responded to this with caution and increased its net cash position from £107.5m to over £1bn.Â
Focused on the London market, and the South East of England, Berkeley’s focus is building houses to a high standard. Its proposal also outlined plans for a 50% increase in production and delivery in the next six years.
The Berkeley share chart is an encouraging one to look at, showing an upward trend for over 10 years. In fact, it has seen a 40% rise in the past six months and almost 130% over the past five years.
Its price-to-earnings ratio (P/E) is reasonably low at 13 and earnings per share are £4.
The dividend yield is nothing to write home about at less than 1%, but the proposed capital return to shareholders will boost this. I consider Berkeley a buy.
Positive trading update
Since the appointment of a new Chief Creative Officer Riccardo Tisci in March 2018, Burberry’s brand has strengthened.
In its third-quarter trading update, a good performance was noted, thanks to a strong demand for Tisci’s new collections. The company also remains confident in its full-year outlook for 2020 predicting growth of a low single-digit percentage.
Burberry has an £8.7bn market cap, P/E is 25 and earnings per share are 87p with a 1.9% dividend yield.
Competition is always big in fashion, but the Burberry share price has seen a 34% rise in the past two years. It has a British image that exports well overseas and much of its recent success comes from growth in China. Â
Reflecting this, it has partnered with Tencent, a Chinese multinational tech conglomerate, to create a digital shopping and socialising experience for its customers, both online and in stores.
With this reliance on international sales though, the FTSE 100 stock is vulnerable to foreign exchange movements. Continuing protests and civil unrest in Hong Kong are also a cause for concern as sales in the area halved in the latest quarter.
China’s recent coronavirus outbreak may also cause a slowdown in Chinese transactions.
Despite these headwinds, I think it has room for future growth. It is a power brand with a rich British history and looking over the past decade, the Burberry share price has risen close to 250%. I see it as a buy.
Long-term gains
It is important to remember that despite all the worrying headlines and forecasts of doom, many companies will thrive. Burberry was founded way back in 1856 and I find it incredible that a clothing brand could survive this long, but survive and thrive it has.
Stock market investing is a long game. Accumulated wealth will come to those willing to display patience and discipline while adhering to a carefully constructed strategy.