With companies on the London Stock Exchange trading at dirt cheap prices, contrarian investors have been doing quite a bit of shopping in 2025. Among them is Alex Wright, the chief manager of Fidelity International’s UK-focused funds.
While most investors have been panicking about the impact of tariffs and the general cost-of-living crisis in the UK, Wright has a different view. Instead, he believes the UK’s actually far more insulated against the brewing trade war and local economic conditions. So much so, he’s started snapping up shares in big-ticket item retailers, including Howden Joinery (LSE:HWDN).
A hidden value opportunity?
Howden’s known for its award-winning fitted kitchens. And with the firm’s recent expansion into fitted bedrooms, it’s arguably one of Britain’s biggest players in the home renovation space. But with tax hikes by local councils, higher bills from energy and water companies, and rising internet and mortgage costs, the home renovation market isn’t exactly firing on all cylinders right now.
The impact of this has been reflected in Howden’s latest results. While international performance remains robust, sales in the UK are basically flat as per its April trading update. Considering the company has historically posted double-digit growth, the slowdown has understandably spooked some investors. Consequently, around 20% of its market-cap has been wiped out since September.
But could this be a buying opportunity? Wright’s thesis is built around an incoming rebound within the home renovation market.
Interest rates have steadily started coming down. That reduces pressure on all British businesses and households, and is expected to translate into more affordable bills, either through salary increases or price dips.
At the same time, weaker competitors, particularly in the private sector, have been being eliminated from the market. Kitchen Love ceased trading in 2024. And both CTD Tiles and Homebase have entered into administration. That means Howden now has fewer rivals to contend with when the renovation cycle starts to ramp back up, creating opportunities to capture more market share. After all, despite the recent challenges, Howden remains a highly cash-generative enterprise.
What could go wrong?
It’s hard to argue with Wright’s logic. Even more so considering I actually bought Howden Joinery shares back in August 2022 on a similar thesis. And so far, it’s proven correct with my initial investment delivering close to 40% capital gains versus the FTSE 100‘s 16%.
However, just like in 2022, an investment in Howden Joinery today isn’t without its risks. Despite the bankruptcies, there are still plenty of competitors seeking to take advantage of the growing gap in the fitted kitchen market.
At the same time, the company, despite being vertically integrated, is still reliant on a steady supply of timber. Considering an estimated 81% of timber used in the UK is imported, supply chain disruptions from expected trade wars could throw a spanner into the works.
The bottom line
There are plenty of value opportunities on the London Stock Exchange to capitalise on right now. And all things considered, I think Howden Joinery could be one of them. So for investors seeking to snap up shares trading at a discount to their potential, this enterprise is definitely worth considering, in my opinion.
