A couple of positive updates from domestic Companies exposed to what are seen as the vulnerable sectors of Housing and Car sales. Firstly there was Bellway (BWY) the national house builder which has been one of my favourite plays in the sector over the last few years. They continue to look cheap given the on going strong trading and the price fall since the BREXIT vote. The current strong trading is however largely backward looking as they are updating to their year end which was 31st July 2016. Like many others on current trading they say it too early to tell the impact of the vote but they do observe that recent weeks have been encouraging, visitor numbers are still strong and the cancellation rate remains at a historic low. In addition to this they flag a strong forward order book which seems to account for around half of the turnover they did this year and having invested in land they say they are well placed to continue their sizeable contribution to meeting the UK’s requirement for new homes in the year ahead.
Thus they seem reasonably confident of continued strong trading in the year ahead, although I note that analysts have unsurprisingly down graded next years numbers heavily recently to the extent that they now see a near 10% fall for next year. Now as we know analysts are not that good at forecasting so it will remain to be seen if they have been too pessimistic or to optimistic in this regard. Personally I would tend to still be more favourably disposed towards the house builders given all the monetary and probably fiscal support to come and the on going housing shortage which should all help to underpin demand and allow them to keep pumping up the volume and paying out generous dividends. As ever though I guess you pay your money and take your choice and those that believe that the economy and housing market are about to crash on the back of BREXIT will obviously not be going near house builders or may be even shorting them.
Another of my favourite stocks S&U (SUS) the car loan finance company also reported a strong update today. If any thing the Chairman, Anthony Coombs was almost too cocky for my liking when he said: "In contrast to the recent gyrations and doom saying in the stock and currency markets following June's Brexit vote, trading in the real world at our Advantage motor finance business continues as strong and consistent as ever. Customer applications are at a record high with live customer numbers up 39% on last year at over 38,000 whilst margins are being maintained." Again this is largely backwards looking and they did suggest that credit quality was not quite at last years record levels but still within the range of expectations. He then went onto say: "A sound and consistent strategy, substantial investment and a dynamic and committed team both at Advantage and the Group, form the bedrock of S&U's progress. That is why, whatever the current economic uncertainties, we continue to regard the future with great confidence."
Now while I like to see a confident statement from management I do just get a bit worried about hubris kicking in when they start to sound so bullish when things are going well, which as we know in the stock market is not normally a good thing. Despite that caveat it does still look reasonable value on around 13-14x earnings with a near 4% yield. In addition looking at the numbers they are talking about I wouldn't be surprised to see some upgrades on the back of this so on that basis I'll stick with it.