Disappointing PMI data led to a sell-off in housebuilding stocks on 4 July; however, retail investors are seeing opportunity in crisis.
Shortly after figures were released showing a contraction in the UK construction industry, the pound hit a new low of $1.3241 and housebuilders’ stocks quickly gave up their early morning gains with Persimmon, Barratt Developments and Berkeley Group all closing over five per cent down.
According to AJ Bell, retail investors have given the sector a vote of confidence by snapping up shares at a bargain price. In the immediate aftermath of the vote, trading activity on its investment platform was five times normal volumes. Approximately two thirds of these trades were buys, compared to one third sells.
“Retail investors have been taking advantage of buying opportunities following dramatic post Brexit vote falls in share prices,” said Russ Mould, investment director at AJ Bell. “Banks and house builders, whose shares have been hit worst by the market volatility, dominated the top 10 most frequently purchased stocks.
Indeed, shares in Taylor Wimpy, which has lost a third of its value since the UK voted to leave the EU, was the third most popular buy. Persimmon and Barratt Developments also featured in the top 10.
“These figures suggest investors are taking advantage of short term volatility to snap up some bargains,” said Mould. “Market volatility driven by sentiment rather than company fundamentals is normally short-term and many investors seem to be focusing on what really drives share price valuations over the long term – profits and cash flow growth.”