Tuesday share tips: UK house builders, ABF

9th Sep 2014 07:00

Some of the froth has come off the housing market, but home prices have hardly crashed and the largest firms continue to offer attractions for investors. Indeed, shares in the seven largest builders have underperformed the FTSE All-Share during the last six months. However, interest rates, even if they are due to rise, will do so from a very low base and politicians continue to search for an economic recovery. That is a ‘green light’ for further growth in builders such as Bellway, Bovis and Redrow.Analysts at Numis expect the annual volumes at those three companies to roughly double between 2012 and 2020. That may crimp their dividend pay-outs, but other outfits such as Taylor Wimpey and Persimmon are planning higher cash returns. Predicting house prices is about as predictable as the weather and football, but the above should offer some comfort to investors, says the Financial Times’ Lex column.If you are a minority investor then you are pretty much limited to deciding whether you are either in or out of a stock. A case in point is Associated British Foods. Its Primark unit, which now accounts for almost half the company’s profits, saw like-for-like sales speed ahead by 4.5% over the year to 13 September, with operating margins at 13.1%. That is an outstanding performance. Its sugar unit, however, continues to be trapped in the quagmire which results from excess output weighing on global prices. Since the company believes it is one of the most efficient producers in the space it expects to benefit when prices return back above its own cost of production.Arguably, Primark should have been spun off through a flotation earlier in the year. Shareholders would thus have been able to take advantage of the robust valuations afforded to discount retailers. However, the Weston family, which owns 55% of the stock, will have none of it, but investors have little to complain about. Trading on 25 times’ this year’s earnings the stock’s valuation is high but the shares remain a quality long-term hold, writes The Times’s Tempus.