The housebuilder’s earnings per share are forecast to grow by 77 per cent in 2014, giving a forward price/earnings ratio of 13. What is more, the dividend is set to double, implying a prospective dividend yield of 1.5 per cent. House-builder balance sheet problems of a few years ago are history and the long-term property cycle has turned back up, in my opinion. (Fred Harrison’s book “Boom Bust: House Prices, Banking and the Depression of 2010”, published in 2005, is a must read for readers who are interested in long term UK property cycles).
Ultimately, I see quantitative easing leading to inflationary problems, and I reckon that real-estate and housebuilders will provide a hedge against this. However, there is a risk that Barratt’s valuation already factors in a full-blown economic recovery in the UK, leaving it vulnerable to disappointment along the way. Still, I am happy enough with Barratt’s long-term prospects, knowing that its problems are largely behind it and that the property market has the government’s backing. It’s a good addition to my ValuableGrowth portfolio.
ValuableGrowth Update
The other shares that I have bought are Regus, SOCO International, SpaceandPeople, Augean and HML Holdings. As I wanted to put my cash to work, but am still wary of a stock-market correction, I decided to increase my exposure to mining stocks, which have been in a bear market for just over 2 years. My cycle-work indicates that gold bottomed in June 2013 and the recent “double bottom” formation was the opportunity to go long. I chose the Market Vectors Junior Gold Miners ETF (GDXJ) as the companies within are all producing gold, while there is a dividend due this month. How much remains to be seen and I am hoping that clarity around this, as well as gold moving into an uptrend may put a floor in the price. However, it is effectively a leveraged gold play and is very volatile.
| Asset | Date Bought | Price (£) | Quantity | Cost £ (inc commission & stamp duty) | Price on 11/12/13 | Value £ | Gain % |
|---|---|---|---|---|---|---|---|
| AMER | 24/06/2013 | 0.39 | 5069 | 1,999.74 | 0.51 | 2,589.25 | 29.48% |
| TAST | 22/07/2013 | 0.86 | 2299 | 1,999.98 | 1.22 | 2,793.29 | 39.67% |
| SSY | 24/07/2013 | 0.695 | 2828 | 1,988.29 | 0.69 | 1,937.18 | -2.57% |
| ASW | 10/09/2013 | 0.8735 | 2263 | 1,999.56 | 0.92 | 2,079.24 | 3.99% |
| SAL | 14/10/2013 | 1.08 | 1830 | 1,999.23 | 1.22 | 2,238.09 | 11.95% |
| POLR | 28/10/2013 | 5.05 | 391 | 1,996.59 | 4.86 | 1,898.31 | -4.92% |
| BDEV | 28/10/2013 | 3.356 | 589 | 1,999.51 | 3.45 | 2,029.11 | 1.48% |
| SIA | 28/10/2013 | 3.9945 | 494 | 1,996.10 | 3.94 | 1,948.68 | -2.38% |
| RGU | 30/10/2013 | 2.0506 | 966 | 1,999.03 | 1.97 | 1,900.12 | -4.95% |
| AUG | 11/11/2013 | 0.44 | 4493 | 1,999.75 | 0.46 | 2,044.32 | 2.23% |
| GDXJ | 12/11/2013 | $35.05 | 450 | $15,790.65 | $30.90 | $13,905.00 | -11.94% |
| HMLH | 11/12/2013 | 0.365 | 5416 | 1,999.67 | 0.37 | 1,976.84 | -1.14% |
Kerry Balenthiran is the author of “The 17.6 Year Stock Market Cycle, Connecting the Panics of 1929, 1987, 2000 and 2007”.
Disclaimer: Kerry Balenthiran owns shares in Barratt Developments plc and the other shares mentioned in this article.
