I’d Buy This Cheap Stock Today! I Reckon Its Share Price Could Still Surge In September
Demand for shares on British stock indices remains extremely weakw. The FTSE 100, for instance has made fractional gains only in September. And this follows a summer during which prices of UK shares on the Footsie retrated in value
There’s a number of factors that could keep demand for UK shares in the gutter. Rising Covid-19 infection rates, and disappointing news on the hunt for a vaccine are the most obvious. Rising trade tensions between the US and other major economies are another, whilst rising civil unrest in the States and heightened political uncertainty in Washington provide reason to be pessimistic.
Throw a rocky Brexit process into the mix, too and there’s clearly plenty of reason why demand for UK shares could remain quite pathetic. The possibility of another stock market crash can’t be ruled out, either. But that doesn’t mean that all British stocks are in danger of flailing or sinking in the near term. Indeed, I think this UK share — which I’d buy today and hold for years — could still surge in September.
Trade Is Picking Up
Housebuilder Redrow has shed a whopping 40% of its value since the start of 2020. It’s been a pig of a year for the business as Covid-19 smashed the UK economy, lockdown measures caused the homes market to grind to a halt, and construction work at the builder’s sites was closed down.
Trading has (largely speaking) been strong since newbuild creators like Redrow re-opened their sales offices and homebuyers came out of hibernation, however. Pent-up demand for homes has been strong, and the government’s Help to Buy purchase incentive scheme has helped property sales shoot through the roof. The introduction of stamp duty holidays has helped to massage demand too.
The latest survey from the National Association of Estate Agents said that average home sales per branch hit 13 in July. This was the best monthly result since 2007 and was up 44% year on year. Industry signals have remained encouraging since then and I’m expecting another robust trading update from Redrow tomorrow (Wednesday, September 16), one that could help its share price to soar again.
A Future Growth Star
The British economy faces significant headwinds in the short term. And this threatens to derail strong trading at Redrow and its peers. Still, I don’t expect newbuild sales to slump. Why? Well Britain’s massive homes shortage means that demand for newly-created properties should remain strong. Data from homelessness charity Shelter illustrates this perfectly. It shows that more than 380,000 homes that were given planning permission between 2011 and last year remain unbuilt.
Redrow’s share price collapse in 2020 leaves it trading on a dirt-cheap forward price-to-earnings (P/E) ratio of 11 times. And this provides an attractive level for long-term investors to buy in at, in my opinion. The builder’s expected to bounce from a 56% earnings drop this year with a 36% bottom-line jump in 2021. I’d snap this FTSE 250 stock up today in expectation of making terrific returns in the coming years.