Ding Dong Merrily on high...

..or not as Santa seems to have gone missing in action and has failed to deliver his Christmas rally to the market so far this year. Let's hope the bell hasn't rung for the top of the market after 14 years of FTSE struggling to make it through it's 1999 /2000 peak.

Any way talking of bells we have had an AGM and IMS from Bellway (BWY) today, which is a stock that I built up back in April this year. Unsurprisingly this was all quite positive given the on going strength in the housing market this year, although they do allude to the fact that it has returned to a more normal seasonal pattern. In addition they also suggest that unsurprisingly the London market cooled a bit when they said:

"The London market remains strong and the Group continues to experience high levels of demand for its product...the significant growth in revenue recently experienced on certain London developments has now abated, resulting in a return to more sustainable market conditions."

While as I would have expected there is still some reasonable demand in the rest of the country where they say:

"Across the rest of the country, the pricing environment remains positive with the strong demand ensuring that incentives continue to be used sparingly. This has resulted in the Group still achieving selling prices in line with, or slightly in excess of, initial acquisition expectations."

Summary & Conclusion:
A positive update from Bellway, as you would expect and it is good to see that they are talking about getting margins up to 20% versus around 17% on top of volume growth which they suggest will be "slightly in excess of 10%". This compares to consensus forecasts of 13.8% for the year (Source: Reuters / Stockopedia) so I guess that could be a bit light but maybe the margin is better? They also suggest that the volume growth will be weighted to the first half to the end of January 2015.

This seems like a reasonable assumption given the General Election next year and the rise in prices may bring a note of caution to the housing market in the first half of 2015. However, the house builders generally still seem to be supported by a strong tail wind from government's policies and the need for more houses to be built.

Consequently in the short term, given how well the shares have done recently, it is not that surprising to see them off on some profit taking in a soggy market. Having broken out recently it looks as though the old highs from earlier this year around 1700 pence could provide some support  (see chart below). While on the fundamentals before any changes on the back of today's announcement they look good value on less than 10x P/E with a 3.4% dividend yield. So I wouldn't be tempted to take Mr. Markets panicky bid today, but I might revisit the case for some profit taking in the New year when perhaps market conditions might be more favourable and when they report some strong h1 numbers.

So to finish today's post and carry on the musical / bells theme see the video after the graph. If that's too disco for you, then check out today's Advent Calendar for a ringing endorsement of a previous Christmas hit.

....in heaven the bells are ringing.