Liberum has named Persimmon and Taylor Wimpey as two of its top picks, after a recent sell-off created an “attractive” buying opportunity among housebuilders.
In a note published on Monday, the broker said it saw “material upside in Persimmon and Taylor Wimpey”, both of which have ‘buy’ ratings and price targets of 3,400p and 195p respectively.
It continued: “The recent sell-off offers an attractive buying opportunity. We expect a further round of upgrades in the next month to be a catalyst for the sector. Positive updates from the six housebuilders scheduled to report in the next month should reassure investors that trading remains strong, and the Stamp Duty holiday has not been the main driver of demand.
“We continue to find good value in the sector, as it now trades 1.7x 12-month forward price to net asset value compared to 2.1x before the pandemic. We favour Persimmon and Taylor Wimpey among the large caps, but find value more widely in the smaller householders.
“We forecast earnings to increase by 6% per annum in 2021-24, with a dividend yield of 6% in December 2022.”
Among the smaller housebuilders, Liberum flagged Bellway, MJ Gleeson, Redrow and Vistry. All have ‘buy’ recommendations, with price targets of 4,075p, 1,060p, 800p and 1,530p, respectively.
Liberum has ‘hold’ ratings on Berkeley and Crest Nicholson, and a ‘buy’ recommendation on Barratt Developments.
Vistry, Persimmon, MJ Gleeson, Barratt, Taylor Wimpey and Bellway are all due to post updates in the coming weeks.
