The Taylor Wimpey (LSE: TW) share price has suffered this year amid fears of a recession. However, some data seems to suggest strength in the housing market, and could serve as catalysts to spark a further rally.

Builds are looking up

Compared to pre-pandemic levels, Taylor Wimpey posted an excellent set of numbers for the first half of 2022 with results coming in above analysts’ consensus. This then sparked a 10% recovery in the share price.

With such solid numbers and positive guidance, it doesn’t seem like Taylor Wimpey is likely to lose momentum any time soon. Cancellations in absolute numbers are down, while customer interest remains high, and orders for the rest of the year are almost filled.

In fact, management is so confident about the company’s future that they’ve decided to increase the interim dividend by 12%, to 4.62p per share. This confidence was further reflected in a couple of high-ranking directors purchasing £50,000 worth of shares in August, so far.

Moreover, the company recently launched its new range of energy efficient homes. With the national EPC rating currently at D, I’m expecting these new homes with average EPC ratings of A or B to capture more market share.

Rough landing

Despite the upbeat outlook though, the wider macroeconomic data hasn’t quashed fears of a house market crash. As a result, the Taylor Wimpey share price recovery has stalled. This is a reflection of stalling house prices seen in the most recent RICS House Price Balance and Nationwide House Price Index.

Furthermore, mortgage approvals have been steadily falling according to the UK’s biggest mortgage lender, Lloyds. Along with this, mortgage repossessions saw an uptick in the first three months of the year.

To make matters worse, mortgage rates are expected to go higher with interest rates. This would affect the 2m households currently on variable mortgages, and another 1.8m households on fixed rate mortgages that expire next year.

Additionally, Taylor Wimpey faces trouble building more homes due to a nutrient neutrality issue. This is a problem regarding new developments exacerbating nutrient burdens on the soil in the area. The issue is expected to affect up to 120,000 homes across England. Nonetheless, CEO Jennie Daly is confident that the FTSE 100 firm’s large and geographically diverse land bank puts it in a good position to overcome this challenge.

Curb my optimism

Having said all that, I’m still a fan of Taylor Wimpey shares. Its balance sheet is solid, and it boasts quality earnings with high margins. Its dividend continues to see healthy increases too, with CFO Chris Carney stating that it would still be able to pay £250m worth of dividends even in its worst projected economic scenario.

But as much as I am positive about Taylor Wimpey’s numbers, I don’t think its share price will be rebounding into the green soon. I just don’t think the company has a unique enough selling point to outperform the wider market. Not to mention, there’s also a potential recession on the cards. Therefore, I’ll be putting Taylor Wimpey on my watchlist for the time being, and may open a position if its share price continues to dip, as I believe that its upside would be rather attractive.

The post Will the Taylor Wimpey share price rebound soon? appeared first on The Twelfth Magpie.

More reading

• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?
• This 7.7% yielding dividend stock trades at a 13-year low – time to consider buying?
• £10,000 in these 3 FTSE 250 stocks could generate £982 of passive income over the next 12 months!
• How much would you need in a Stocks and Shares ISA to earn £33,814 a year in dividend income?

John Choong has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group. 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 seen a 10% recovery since it bottomed in mid-July, although it’s still in the red. With that in mind, I could consider buying some of its shares before a stock market recovery gets underway.

Building momentum

The FTSE 100 housebuilder reported its half-year results recently, and I must admit that I was rather impressed. The increase in house prices has managed to offset inflation in build costs, leading to an increase in operating margin, and that sat well with investors as its share price saw a 5% increase.

Although several figures saw declines, it’s important to consider context. For instance, the lower level in completions is due to tougher comparisons from last year, which saw orders from Q4 2020 pushed into H1 2021. Additionally, the fall in EPS is attributed to the increase in the pre-exceptional tax rate from 18.3% to 22.1%, as a result of the introduction of the property developer tax. Finally, the decline in free cash flow was down to further investments in land and current projects.

So, despite the drop on the top and bottom lines, Taylor Wimpey is still growing healthily. The board even revised its outlook upwards for the full year. They’re now guiding for FY22 results to be around the top end of analysts’ consensus.

Strong pipeline

Even though management’s guidance is upbeat, it becomes a bit of a head-scratcher when taking the recent house price data into consideration. For example, the latest RICS house price balance indicates that house owners are expecting prices to decline over the next 12 months.

These expectations go hand in hand with the narrative that house affordability will dwindle as the Bank of England increases interest rates, thus driving mortgage rates higher. The effects of this can already be seen in the most recent Nationwide house price index, as house prices are beginning to stall. With inflation expected to only peak at 13%, the Bank still has a long way to go in its rate-hiking process.

Nonetheless, the Taylor Wimpey board still struck an optimistic tone in their H1 earnings call, and I can see why. For one, customer interest remains at high levels. Moreover, the property developer is already 92% forward sold for FY22, and has opened orders for Q1 2023. More importantly, cancellations in absolute numbers are down 9% year over year (yoy), and down 29% from 2019.

Solid foundations

Taylor Wimpey has got an excellent balance sheet. The company has a stellar debt-to-equity ratio of 2%, with £4.28bn in cash and only £87m of debt. Not to mention, the firm saw its profit margins increase by 2.5% (yoy). To complement this, its massive short-term land bank of ~88,000 plots leaves its business well positioned and flexible.

Therefore, despite macroeconomic indicators painting a gloomy picture, Taylor Wimpey looks to be heading in the opposite direction for now. But even with a decent price-to-earnings (P/E) ratio of seven, I’m cautious about buying Taylor Wimpey shares. The possibility of the UK staying in a recession for a prolonged period could send house prices and its share price lower. As such, I’ll be putting Taylor Wimpey on my watchlist for the time being, and may consider buying once housing data improves.

The post Should I snap up Taylor Wimpey shares at £1.30? appeared first on The Twelfth Magpie.

More reading

• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?
• This 7.7% yielding dividend stock trades at a 13-year low – time to consider buying?
• £10,000 in these 3 FTSE 250 stocks could generate £982 of passive income over the next 12 months!
• How much would you need in a Stocks and Shares ISA to earn £33,814 a year in dividend income?

John Choong has no position in any of the shares mentioned. 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.

Taylor Wimpey (LSE: TW) shares, along with other housebuilder stocks, have been in a steady decline this year. The stock is down by more than 30% on a year-to-date (YTD) basis. But with a price-to-earnings (P/E) ratio of 8 and a dividend yield of 7%, its shares look lucrative to me.

Housing market gets wimpy

The rise in mortgage rates paired with sky-high inflation have pushed both the Halifax and Rightmove House Price Index to indicate slowing house price growth. Consequently, analysts are predicting prices to drop in the coming months. This has been one of the main reasons behind the drop in the Taylor Wimpey share price.

This trend has been further underlined by the latest RICS data, which has shown that house prices have seen the lowest increase in over a year. The index measures the percentage of surveyors reporting a house price rise in their designated area, minus those reporting a fall.

More crucially, however, the Help to Buy scheme is set to end in March. With the scheme contributing to 36% of Taylor Wimpey completions last year, this could have a substantial impact on the housebuilder’s top line.

In a tight spot

The UK housing market has been lacking supply for quite some time now. As such, the Taylor Wimpey board has talked of its commitment to addressing the housing shortage. It has cited plans to significantly increase annual completions in the next few years. However, this is on condition that the market remains broadly stable, which may not be the case if it starts to dip.

A lack of demand gives less incentive for housebuilders to meet supply needs, especially when it drives house prices further down. Not to mention, higher material, fuel, and labour costs will impact profit margins as well. These factors don’t give the developer any reason to build more houses.

Furthermore, Taylor Wimpey faces tough competition from Persimmon and Barratt. It has the fewest number of completions as compared to the other two housebuilders, and has a higher average house price than the former. This puts it in a tough spot in the market without a unique niche. Therefore, the company’s fate is in the hands of the wider housing market for the time being.

Landing big profits?

So, are Taylor Wimpey shares worthy of an investment on my part? Well, the builder has an excellent set of financials — a 1.9% debt-to-equity ratio, £921m in cash, and a 13% profit margin. This shows healthy pricing power and a strong balance sheet to withstand a recession. Moreover, it’s got a landbank of approximately 232k plots, giving it a lot of room to build. This is evident from its £3bn backlog in orders.

That being said, I’ll only be putting Taylor Wimpey on my watchlist for now. While its exposure to markets across the UK gives it more potential to expand, I don’t think it has a strong enough unique selling point given the current macroeconomic environment. As a result, I don’t see this as an opportune time to buy its shares as I expect the housing market to cool further. But if its share price continues to drop, I may consider opening a position, as the British housing market has a history of providing healthy, long-term returns.

The post Are Taylor Wimpey shares a buy at £1.20? appeared first on The Twelfth Magpie.

More reading

• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?
• This 7.7% yielding dividend stock trades at a 13-year low – time to consider buying?
• £10,000 in these 3 FTSE 250 stocks could generate £982 of passive income over the next 12 months!
• How much would you need in a Stocks and Shares ISA to earn £33,814 a year in dividend income?

Lloyds

Lloyds (LSE: LLOY) is one of Britain’s biggest financial institutions. It earns the bulk of its revenue from mortgage loans. This week, a large number of director dealings occurred with Lloyds shares going both ways.

• Name: Charlie Nunn
• Position of director: Chief Executive Officer
• Nature of transaction: Free shares
• Date of transaction: 22 June 2022
• Amount purchased: 312,313 @ £0.43
• Total value: £135,843.66

• Name: William Chalmers
• Position of director: Chief Financial Officer
• Nature of transaction: Free shares
• Date of transaction: 22 June 2022
• Amount purchased: 149,910 @ £0.43
• Total value: £65,204.85

• Name: Antonio Lorenzo
• Position of director: Chief Executive Officer (Scottish Widows)
• Nature of transaction: Free shares
• Date of transaction: 22 June 2022
• Amount purchased: 148,661 @ £0.43
• Total value: £64,661.59

• Name: Antonio Lorenzo
• Position of director: Chief Executive Officer (Scottish Widows)
• Nature of transaction: Disposal of shares
• Date of transaction: 22 June 2022
• Amount sold: 150,000 @ £0.44
• Total value: £65,457.30

• Name: Vim Maru
• Position of director: Retail Group Director
• Nature of transaction: Free shares
• Date of transaction: 22 June 2022
• Amount purchased: 148,661 @ £0.43
• Total value: £64,661.59

• Name: David Oldfield
• Position of director: Commercial Banking Group Director
• Nature of transaction: Free shares
• Date of transaction: 22 June 2022
• Amount purchased: 145,746 @ £0.43
• Total value: £63,393.68

• Name: Janet Pope
• Position of director: Chief of Staff and Sustainable Business Group Director
• Nature of transaction: Free shares
• Date of transaction: 22 June 2022
• Amount purchased: 104,104 @ £0.43
• Total value: £45,281.08

• Name: Stephen Shelley
• Position of director: Chief Risk Officer
• Nature of transaction: Free shares
• Date of transaction: 22 June 2022
• Amount purchased: 147,828 @ £0.43
• Total value: £64,299.27

• Name: Andrew Walton
• Position of director: Group Corporate Affairs Director
• Nature of transaction: Free shares
• Date of transaction: 22 June 2022
• Amount purchased: 104,104 @ £0.43
• Total value: £45,281.08

Taylor Wimpey

Taylor Wimpey (LSE: TW) is one of the UK’s biggest residential developers. Both the Taylor Wimpey CEO and Chairman bought a large sum of Taylor Wimpey shares this week. This course of action hopes to shore up investor sentiment amid slowing house price growth.

• Name: Irene Dorner
• Position of director: Chairman
• Nature of transaction: Purchase of shares
• Date of transaction: 22 June 2022
• Amount purchased: 21,750 @ £1.15
• Total value: £25,016.20

• Name: Jennie Daly
• Position of director: Chief Executive Officer
• Nature of transaction: Purchase of shares
• Date of transaction: 22 June 2022
• Amount purchased: 21,509 @ £1.15
• Total value: £24,812.57

Berkeley

Berkeley (LSE: BKG)  is another one of Britain’s biggest housebuilders. The FTSE 100 firm reported a decent set of results this week. However, this wasn’t enough, as the Berkeley share price slid downwards. Nonetheless, a large set of director dealings and institutional buying amounted to millions of pounds in Berkeley shares. This should boost investor sentiment in the long-term, despite slowing house price growth.

• Name: William and Jane Jackson
• Position of director: Non-Executive Director and Person Closely Associated to Non-Executive Director
• Nature of transaction: Purchase of shares
• Date of transaction: 22 June 2022
• Amount purchased: 16,148 @ £36.57
• Total value: £590,566.42

• Name: Robert Perrins and Vanessa Perrins as Trustees of the Robert Perrins Discretionary Settlement
• Position of director: Person(s) Closely Associated to Rob Perrins (Berkeley Chief Executive Officer)
• Nature of transaction: Purchase of shares
• Date of transaction: 22 June 2022
• Amount purchased: 50,000 @ £36.57
• Total value: £1,847,644.75

• Name: Michael Dobson
• Position of director: Non-Executive Director
• Nature of transaction: Purchase of shares
• Date of transaction: 22 June 2022
• Amount purchased: 4,000 @ £36.17
• Total value: £144,686.56

• Name: Julia Barker
• Position of director: Person Closely Associated with Glyn Barker (Berkeley Chairman)
• Nature of transaction: Purchase of shares
• Date of transaction: 22 June 2022
• Amount purchased: 1,950 @ £37.27
• Total value: £72,669.37

Types of shares in a SIP

To provide context, there are a few types of shares within a company’s share incentive plan (SIP). A SIP is an employee plan for companies within the UK to flexibly award equity to employees. Publicly listed companies normally exercise this option because it’s tax-efficient for both the employer and its employees.

In this instance, most of the director dealings at Lloyds occurred with free shares. These shares were acquired by directors under the Lloyds fixed share award scheme. Share award schemes give employees actual shares rather than share options. The value of shares given to directors here are treated as employment income. This means that they may be subject to tax and national insurance contributions. That is unless they opt for an HMRC-approved share scheme, which has its own rules and requirements.

The post Director dealings: Lloyds, Taylor Wimpey, Berkeley appeared first on The Twelfth Magpie.

More reading

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John Choong has no position in any of the shares mentioned at the time of writing. The Motley Fool UK has recommended Lloyds Banking Group. 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.

Taylor Wimpey loses interest

Last month, the UK central bank opted to continue its rate hikes, bringing interest rates to 1%. Consequently, the mortgage rate has spiked to 4.1%, having spent the majority of last year at 3.6%. Worries that higher interest rates could result in a house market crash have spooked Taylor Wimpey investors into a sell-off.

Both Halifax’s and Nationwide’s data continue to show that house prices are on the rise. However, both companies have forecasted a cooling of house price growth as we head into winter. In fact, the cracks are already starting to mount. Since the second half of April, around one in 20 properties have had price reductions of 5% or more. This is an increase from one in 22 properties from March, sending the Taylor Wimpey share price lower.

Glass ceiling

Despite the expected cooldown in house prices, Taylor Wimpey can only grow so much. Management mentioned that output of houses have taken a setback due to expensive raw materials and supply chain bottlenecks. Moreover, higher inflation and a low unemployment rate is putting pressure on profit margins. This was evident in the FTSE 100 firm’s FY2021 results, as profit margins decreased 2.5% from two years ago. That being said, Taylor Wimpey provided a positive set of guidance for the year ahead.

Whilst interest rates have risen, they remain at historically low levels and, with good availability of competitively priced mortgages, we are experiencing strong levels of customer interest.

Source: Taylor Wimpey 2022 Annual General Meeting

Tough as bricks?

Even though scepticism fills the air around housebuilder shares, I think there might be a buying opportunity for me here. For one, renowned real estate agent Jeremy Leaf said, “Activity in the market at the moment is more determined by a shortage of stock rather than a softening of demand being prompted by the cost-of-living crisis.” This gives me reason to believe that house prices may just hold its weight despite a slow down in price growth.

Aside from that, Taylor Wimpey shares are also very cheap currently. The stock boasts an excellent price-to-earnings (P/E) ratio of 8, making it cheaper than the market average of 15. The British housebuilder also has one of the better dividend yields in the FTSE 100 index, at 6.6%. Paired with a flawless balance sheet, Taylor Wimpey’s fundamentals are extremely solid.

Nevertheless, I am wary that the Taylor Wimpey share price could continue to drop. The Bank of England forecasts an economic contraction to occur later this year, which will not do house prices any favours. Therefore, although there’s strong upside potential, Taylor Wimpey shares are too big of a risk for me to take, and I won’t be buying them right now. Instead, I’ll be looking to purchase other shares that could benefit my portfolio with more financial security in a potential stock market crash.

The post The Taylor Wimpey share price is down 25%. Here’s why appeared first on The Twelfth Magpie.

More reading

• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?
• This 7.7% yielding dividend stock trades at a 13-year low – time to consider buying?
• £10,000 in these 3 FTSE 250 stocks could generate £982 of passive income over the next 12 months!
• How much would you need in a Stocks and Shares ISA to earn £33,814 a year in dividend income?

John Choong has no position in any of the shares mentioned at the time of writing. 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.

HSBC

The HSBC share price has had a volatile time so far this year. The stock jumped nearly as high as 25% only to drop back down to a 5% gain this year. This has been mainly down to speculation of the bank having to break up its Asian and western operations. Amid all of the volatility however, it still didn’t stop a director from acquiring shares this week.

Dame Carolyn Fairbairn (The former CBI Director General) purchased a large number of HSBC shares on Wednesday.

• Name: Dame Carolyn Fairbairn (Non-executive Director)
• Nature of transaction: Acquisition of shares
• Date of transaction: 18 May 2022
• Amount purchased: 15,000 @ £5.01
• Total value: £75,150.00

National Grid

National Grid disclosed its FY22 results this week. The energy company reported an underlying operating profit of £4.0bn, which is 11% higher year on year. The firm also announced a final dividend of 33.76p, bringing the total dividend to 50.97p. This is a 3.7% increase in its yield. As a result, the National Grid share price is now up by more than 10% this year, sparking interest by a director in buying shares.

There’s still plenty of worry in the air. Talk of a possible windfall tax on energy companies has hindered the stock’s trajectory upwards. Nonetheless, a non-executive director still saw this is an opportunity to buy National Grid shares on Thursday.

• Name: Victoria Wood (CAP of Tony Wood, Non-executive Director)
• Nature of transaction: Acquisition of shares
• Date of transaction: 19 May 2022
• Amount purchased: 2,000 @ £12.29
• Total value: £24,586.60

Taylor Wimpey

Housebuilding giant Taylor Wimpey had a relatively decent week. Its shares managed to outperform the wider FTSE 100 index as it gained over 2%. Its stock is still down by more than 25% this year, but a number of director dealings are still happening inside the company, suggesting confidence that it has a bright future in the long term.

Although higher mortgage rates are expected to cool the housing market, Taylor Wimpey said: “Demand for our homes remains strong, with the business well positioned to deliver further progress in 2022 and beyond” in its most recent trading update. As such, a number of directors added more shares to their portfolio.

• Name: Jennie Daly (CEO)
• Nature of transaction: DRIP shares
• Date of transaction: 13 May 2022 (Reported 17 May 2022)
• Amount purchased: 5,815 @ £1.25
• Total value: £7,260.42

• Name: Chris Carney (Group Finance Director)
• Nature of transaction: DRIP shares
• Date of transaction: 13 May 2022 (Reported 17 May 2022)
• Amount purchased: 6,513 @ £1.25
• Total value: £8,131.92

To provide context, DRIP shares are usually part of a company’s share incentive plan (SIP). A SIP is an employee plan for companies within the UK to award equity to employees flexibly. Publicly listed companies normally exercise this option because it’s tax-efficient for both the employer and its employees.

There are many types of shares in an SIP. But in this instance, the CEO and Group Finance Director used the dividends they received on SIP shares to reinvest into further Taylor Wimpey shares. It should be noted though, that dividend shares must normally be held in the trust for at least three years to get full tax relief.

The post Director dealings: HSBC, National Grid, Taylor Wimpey appeared first on The Twelfth Magpie.

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• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?
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John Choong has no position in any of the shares mentioned at the time of writing. The Motley Fool UK has recommended HSBC Holdings. 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.