But can it maintain this level of growth? And should I be adding this business to my portfolio?

The rising Redrow share price

2020 created a challenging operating environment for homebuilders, and Redrow was no exception. With national lockdowns slowing the construction process and house viewings delayed for safety reasons, the company saw a considerable drawback in both revenue and profits.

However, as the business adapted to the new operating environment and lockdown restrictions began easing, its performance has been quite impressive. At least, I think so. Thanks in part to the temporary suspension of stamp study and government support schemes, Redrow’s total sales over the last six months have increased to £1.04bn. That’s about 7% higher than pre-pandemic levels. What’s more, total half-year home completions are back on the rise, with 3,065 houses finished compared to 2,554 in 2020.

Needless to say, these results are fantastic news. With £1.3bn in the order book, I believe that the impact of Covid-19 has finally worn off. And the management team appears to agree, given that it recently reinstated shareholder dividends. So, seeing the Redrow share price climbing these past few months is quite understandable.

Risks to consider

For the moment, house prices are rising thanks to increased demand, especially for properties that have a garden or large open outdoor areas. However, a lot of this growth stems from the favourable buying environment created by those government support programmes that are slowly being removed.

The suspension of stamp duty has already been lifted, while new restrictions were added to the Help-to-Buy scheme that’s scheduled to end in March 2023. The latter is of particular importance as it has substantially improved the affordability of properties. Once this scheme ends, the benefits end with it, and house prices may subsequently fall.

Another risk factor is interest rates. At the moment, they’re at record low levels of 0.1%. This has made mortgage loans far more accessible to low-income consumers. But I think it’s highly likely that rates will once again increase as the economy recovers from the pandemic. Consequently, interest payments on variable-rate mortgages will rise and could lead to a substantial slowdown in house sales as well as values.

The bottom line

Despite Redrow showing some impressive performance, the share price is still trading below its pre-pandemic levels. I believe it’s capable of recovering in 2021, assuming it can maintain its current growth.

However, like other homebuilders, the company appears to be heavily dependent on government support schemes to drive sales. Given that these are ending in the near future, I’d rather wait and see how the firm performs without this assistance. Therefore I won’t be adding any shares to my portfolio today.

The post Will the Redrow share price recover in 2021? appeared first on The Twelfth Magpie.

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Zaven Boyrazian does not own shares in Redrow. The Motley Fool UK has recommended Redrow. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The Taylor Wimpey (LSE:TW) share price has had a pretty good run over the past 12 months, increasing by around 80%. By comparison, the FTSE 100 index is only up by about 23%. So that’s a pretty impressive market-beating performance.

But why is the stock price rising? And should I be adding the company to my portfolio?

The rising Taylor Wimpey share price

Homebuilding stocks, in general, have been performing relatively well recently. While lockdown restrictions have made house sales rather challenging, demand didn’t disappear. And so, house prices over the last year have actually increased by nearly 6%, especially properties with larger open areas like a garden.

What’s more, the housebuilding sector has been receiving particular support from the government. The temporary cut in stamp duty during 2020, the Help-To-Buy scheme, and now the new Mortgage Guarantee scheme are all helping individuals get onto the property ladder. Needless to say, it has created quite a favourable environment for Taylor Wimpey.

Last month, the company published its full-year results, and in my opinion, they showed some encouraging trends. Total revenue and home completions fell by around 36% and 39%, respectively, for the year. This is certainly not good news. However, the drop in performance can be largely attributed to the early disruptions of Covid-19. In other words, they are a short-term problem.

But, taking a closer look at the firm’s operations revealed that it achieved a new record of 10,685 forward orders on homes. That’s a 10% increase since 2019. Meanwhile, the average selling price grew to £288k from £269k. Combining all that with the reinstatement of dividends makes the rising Taylor Wimpey share price understandable to me.

The risks that lie ahead

Real estate is often thought of as a safe investment. But this is not always the case, and just like any other business, there are some risks to consider. A primary one is the government support schemes. These have been monumentally helpful to both homebuilders and consumers. But they won’t last forever and have already begun changing.

For example, this year, the Help-To-Buy scheme now has maximum home price restrictions and is limited to first-time buyers only. Also, let’s not forget the entire scheme is ending in March 2023. And once government support is removed, it’s likely to result in a slowdown in home sales that could significantly impact Taylor Wimpey’s bottom line, and consequently, its share price.

Final thoughts

Given the rising trends in Taylor Wimpey’s performance towards the latter half of 2020, I believe its share price can recover to pre-pandemic levels in 2021.

However, with government support schemes ending in the near future, I’d rather wait and see how the sector performs once the ‘training wheels’ come off. Therefore I won’t be adding Taylor Wimpey to my portfolio today.

The post Can the Taylor Wimpey share price recover in 2021? appeared first on The Twelfth Magpie.

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Zaven Boyrazian does not own shares in Taylor Wimpey. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

If you’re going to dip your toe into choppy waters and invest for the long term, you may as well focus on quality growth stocks.

This is what I think (hope) I’ve done with two new additions to my own portfolio this month. Drum roll, please…

Market leader

Some might baulk at my decision to begin building a stake in property portal Rightmove (LSE: RMV). After all, the housing market has pretty much collapsed since the outbreak of the coronavirus outbreak and could struggle to bounce back in its aftermath.

So, what’s got me buying? There are a few reasons.

First, FTSE 100 constituent Rightmove is the undisputed market leader in what it does. For many, it is the housing market. All attempts by competitors to snatch user eyeballs to date have failed. That’s the sort of economic moat I look for.

Second, this is a company that generates staggeringly high returns on capital employed (ROCE). This is the amount of profit it makes relative to the money it invests in the business.

For fund managers like Terry Smith, ROCE is one of the key metrics to look for when ascertaining whether it’s worth buying a particular growth stock. And he’s not done too badly with this strategy. 

Third, Rightmove has a great balance sheet with £24m net cash at the end of 2019. The recent decision to withdraw the final dividend will help bolster things further.

Fourth, Rightmove’s share price — at the time of writing — is 30% down from where it peaked in February. While anchoring to a historic price should be avoided, I suspect a fair bit of negativity is already priced in. 

But might the shares continue falling? Absolutely! And it’s for this reason I’ve only put a very small amount of my capital to work for now.

Another top growth stock

A second company I’ve started buying in April shares a lot of Rightmove’s characteristics and attractions. It’s an online business with a great brand, high returns on capital and stonking margins. Unlike Rightmove, however, this company’s services are popular with those looking to save rather than spend money.

Step forward price comparison specialist Moneysupermarket.com (LSE: MONY). If we truly are heading for the mother of all recessions then I think it likely traffic to the FTSE 250 member’s site will only increase.

People will still need to renew contracts and policies in tough times, but they’ll be more motivated than ever to do so as cheaply as possible. While dependent on what providers, such as banks and insurance companies, are willing to offer consumers, the firm’s multiple revenue streams should also give it some protection, even if some products are withdrawn. 

Like Rightmove, Moneysupermarket’s finances look steady. The company had net cash of £30m at the end of March and has decided to go ahead with paying its final dividend for last year.

Again, I’ve only bought a small slice for now. But I’ll definitely be looking to add more if (and that’s a sizeable ‘IF’) markets sink back to levels seen in March. 

The post This FTSE 100 giant isn’t the only growth stock I’ve started buying appeared first on The Twelfth Magpie.

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Paul Summers owns shares in Moneysupermarket.com and Rightmove. The Motley Fool UK has recommended Moneysupermarket.com and Rightmove. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

One market favourite recently has been online property listing firm Rightmove (LSE: RMV). The reasons for its popularity are clear: 77% market share, operating margins of 74.7% over the past six months, steadily increasing dividends and share buybacks, and a major shift in the way people shop for property.

The downside for those on the outside looking in is that investors enamoured with these qualities have piled into the shares at a rapid clip and they trade at a lofty 30 times forward earnings.

To live up to this valuation, Rightmove needs to continue growing like a startup rather than the £3.8bn juggernaut it has become. While the past six months saw growth in the number of agency customers only rose 1%, it was able to squeeze enough extra sales out of existing customers to increase revenue per agency by a full 12%.

The good news is that continued double-digit growth in website visits means estate agents will pay a premium to list on Rightmove. What will be interesting to watch is whether it can expand its domestic dominance abroad. Non-UK estate agents already account for 13% of total customer numbers and if Rightmove can expand this number fast, it may be able to live up to current valuations.

At the end of the day, Rightmove’s fortunes remain largely tied to the health of the domestic housing market, but it’s partly insulated thanks to charging agencies a subscription fee rather than per listing. And with the average monthly fee only £789 it would take a sustained and dramatic downturn for agents to begin cutting back on its services.

Purple patch

For the more risk-hungry investor an interesting option is Neil Woodford-backed hybrid online estate agent Purplebricks (LSE: PURP). That business description is a mouthful, but it means Purplebricks will list your home on its site for a fixed fee, rather than the percentage of sale price traditional estate agents charge, and provide the assistance of a local, self-employed estate agent.

This business model gives it a differentiator in a profusion of online estate agents and provides customers with greater peace of mind for such an expensive and life-changing transaction.

The market for Purplebricks’ services is massive as sellers increasingly balk at paying up to 2.5% of the sale price to estate agents who may do no more than list a property on Rightmove. This is evidenced by the 448% increase in year-on-year revenue for Purplebricks.

Now, the company is only two years old so this growth should be taken with a heap of salt. Furthermore, it was lossmaking to the tune of £10.5m last year due to high marketing spend. But with a multibillion pound market to disrupt and the company expecting its first profits next year, Purplebricks may be worth following for growth investors.

The post Forget buy-to-let! These shares could be the best way to profit from property appeared first on The Twelfth Magpie.

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Ian Pierce has no position in any shares mentioned. The Motley Fool UK has recommended Rightmove. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

But make no mistake — there are still plenty of FTSE 100 bargains to be found, despite the index’s rapid ascent.

Build a fortune

The housing segment in particular is one that provides some exceptionally-valued stocks, in my opinion. Fears over a possible housing bubble — allied with concerns over the impact of stamp duty hikes for second homes and buy-to-let properties — have kept prices of Britain’s homebuilders subdued for months now.

I do not share such pessimism, however, and expect a combination of improving buyer affordability, low mortgage rates and a chronically short housing supply to keep home prices moving higher.

This view is shared by the City, and construction giants Barratt Developments (LSE: BDEV) and Taylor Wimpey (LSE: TW), for example, are expected to see earnings advance 19% and 16% respectively in fiscal 2016. These forecasts create ultra-low P/E multiples of 10.9 times.

And helped by bumper cash flows, sector dividends are expected to continue heading through the roof, too. Taylor Wimpey’s projected 11p per share payment creates a monster 5.9% yield, while Barratt yields a stonking 5% thanks to an estimated 29.7p dividend.

By comparison the wider FTSE 100 average yield stands at around 3.5%.

Bank a bargain

Market appetite towards the bombed-out banking sector also remains twitchy, with many of the segment’s major contenders locked around the P/E benchmark of 10 times, which is generally considered cheap ‘paper’ value.

This comes as little surprise given the sector’s high risk profile. Allied with lasting fears over mounting PPI bills, enduring emerging market troubles has kept investor enthusiasm for Santander, HSBC and Standard Chartered on the backburner. And Barclays’ decision to cut the dividend this week has done little to soothe investor nerves, either.

But that is not to say all of the stocks are ‘fairly’ valued. I believe Lloyds (LSE: LLOY) for one is a great long-term selection at current prices as its Simplification restructuring programme delivers stellar gains, while its concentration on the stable British economy keeps earnings stable.

Don’t get me wrong: the massive de-risking of recent years will prevent Lloyds’ earnings from exploding in the coming years — indeed, an 11% decline is currently predicted for 2016. But a P/E rating of 9.4 times is a great level at which to latch onto the banking giant.

And the firm’s increasingly-generous dividend policy certainly merits attention, too. With its balance sheet steadily improving, the number crunchers expect Lloyds to lift last year’s dividend of 2.25p per share to 3.9p in 2016, creating a chunky 5.4% yield. And payouts are anticipated to keep on surging — a projected 4.7p reward for 2017 drives the yield to 6.5%.

The post Which FTSE 100 Stocks Provide Best Value For Money? appeared first on The Twelfth Magpie.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Barclays and HSBC. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.