Vistry (LSE:VTY) was on my list of shares to buy in 2026. So far however, no FTSE 100 or FTSE 250 stock has fared worse this year.
The firm’s issued (what feels like) another profit warning. But the core of my thesis is still intact.
What’s been going wrong?
In general, UK housebuilders have been in a tough situation. Demand has been weak and conflict in the Middle East has been pushing up costs. This has been a problem across the industry.
But Vistry’s found itself in a weaker position than most of its major competitors. Unlike other builders, the firm began the year with a net debt position. And that’s significantly reduced its flexibility in a tough market.
Having obligations to meet means the company’s had to offer bigger discounts to get houses sold. But that’s set to result in lower profits. That’s where the latest profit warning’s come from.
But the things that make Vistry different could be a long-term advantage.
Short interest
Vistry’s been one of the UK’s most heavily-shorted stocks. And with the stock down 60% this year, it’s fair to say that’s worked well.
Does that mean I was wrong to buy the stock? My timing was certainly off, but I’m not giving up on this one with over half the year left.
In its latest update, Vistry outlined a number of moves to get back on track. These include further discounts and limiting land purchases.
Importantly however, management said the following:
The combined effect of the above actions is expected to deliver significantly lower average net debt levels in the second half and we are now expecting a net cash position in excess of £100m at 31 December 2026.
If it can get to this position, I think the stock looks incredibly cheap. It has a market value of £810m and there’s a big opportunity on the way.
The opportunity
So far, Vistry looks like an ordinary housebuilder with an unusually bad balance sheet. But there’s a potentially huge opportunity ahead.
The government’s Social and Affordable Homes Programme (SAHP) is underway. And there are two reasons why this could be huge for the firm. The first is that Vistry’s one of only two companies with Strategic Partner Plus status. This means it can bid directly for £700m in funding.
The other is that it has relationships with the local authorities and housing associations that can bid for the rest. And that’s unusual. Vistry has been turning itself into a specialist in this area. So the £39bn SAHP programme should be a huge opportunity.
Make or break time
Vistry’s issues aren’t imaginary. But my investment thesis for the stock remains intact, for the time being.
I still think there’s a massive opportunity ahead. And the falling share price actually reinforces this.
There’s a lot hanging on the SAHP programme. Vistry’s open market business is facing some serious challenges. If the firm can fix its balance sheet, the second half of 2026 could be much more positive than the first. So I’m cautiously optimistic.
As the stock continues to fall, I’m steadily adding to my position. We’ll see soon enough whether or not that’s the right move.
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Stephen Wright has positions in Vistry.
