Historically, it was said that the UK housebuilding sector was extremely homogeneous, and this was true, barring small differences in location or end market, almost all of the sector’s then much smaller players operated much the same business model. This meant that, largely, it did not really matter which stock you picked as everything was, essentially, a proxy for the housing market cycle.
While the basic operational model remains the same today, there are now more differences between housing businesses: Berkeley Group’s (BKG) expensive flats in central London have very different dynamics, Springfield Properties (SPR) uses a ‘lean portfolio’ model exclusively in Scotland, Persimmon (PSN) owns timber frame and brick-making capacity, Vistry (VTY) is skewing towards social housing contracting or, our focus this week, MJ Gleeson (GLE).
Gleeson might appear to have the same basic model as the rest, but using a very different approach it is able to sell homes at substantially lower prices than the rest and still make, broadly, the same margins. It is also the only housebuilder to have a second operational string to its bow. So what’s the story and does being different make for a better investment in this volatile and cyclical sector?