Short covering in some UK Housebuilders post budget
UK House Builders were one of the perceived beneficiaries of last week’s budget with the announcement of a scheme to help first time buyers of new properties and 10 “improvements” to the planning system. Share prices of stocks in the sector reacted favorably. However the house builders themselves are concerned with the plan of an agenda to devolve planning powers to local authorities from government. We use securities lending data to gain insight into investor sentiment in Bellway Plc (LON:BWY), Taylor Wimpey Plc (LON:TW), Persimmon Plc (LON:PSN) and Bovis Homes Group Plc (LON:BVS)
The Financial Times reported the “industry was cool on the UK housing fix.” This was primarily due to concerns about the role of local authorities in the planning process and a belief that the Government’s push for greater institutional investment in the housing market was “doomed to failure.” Mixed investor sentiment towards the sector is evident when contrasting the upward trend in the share prices against rising short interest this quarter in most of the six quoted House Building stocks we looked at.
As the first house builder to report interim 2011 earnings since the budget, Bellway is certain to draw a lot of investor interest, particularly with regards to the expected impact of changing regulation and the new First Buy scheme. The first-time buyer specialist, last month said it sold almost 4% more homes in its fiscal first half but sought first-time buyer help from the government. It is not then surprising to have seen its share price jump on the budget announcement. Short interest decreased from 2.7% to 1.2% of total shares outstanding on loan since December. However, this has spiked to 2% of total shares outstanding on loan over the past two weeks.
Taylor Wimpey, which selling its US and Canadian house building divisions has indicated that it plans to move away from the traditional volume house building model. Its share price has doubled since November. Following six months of gradual short covering, short sellers have been re-building their positions in the stock. Short interest has increased from a low of 0.5% to 1.5% of total shares outstanding on loan since mid-January. In contrast, holdings of large funds who lend, which can be used as a proxy for institutional ownership, have increased by 30% in this time.
Persimmon records the highest level of short interest amongst the key house builders at 3.3% having increased from 2% of total shares outstanding on loan since February. Although share price continues to rise, institutional ownership has remained static over the past six months as uncertainty remains towards the recovery of the industry.
Short interest has been building in Bovis Homes over the past year and peaked at almost 4% of total shares outstanding on loan in mid-February. However, following the surge in the share price since December and its ability to sustain rises, short sellers have since rapidly covered their short positions down to 2.5% of total shares outstanding on loan. Institutional investors also show positive sentiment towards this stock having increased total holdings by 40% over the past quarter.
