After Gordon's Words
03/26/2004
After the budget everyone seems to have realized there is a shortage of houses! Well anyone looking at property stocks knew this long ago. The problem has been the chattering classes sipping wine around London talking about house price inflation have scared themselves out of buying the property stocks.
These property companies derive much earnings from North of Watford where sales remain buoyant. Consequently, regular followers of this column will have made substantial gains from following these stocks which I have mentioned many times before.
Value-Growth Radar
On the value-growth radar, these companies continue to appear. Wimpey, Bellway, Barratt, Taylor Woodrow, Wilson Bowden, Persimmon, Redrow, ROK.
As long as they continue building and selling in the North and US interest rates remain at 1% and so a drag on our own interest rates then you should expect the stocks to ease forward.
Bellway is a classic case. In January it went sideways at around 650p. Then in February it rose £1. Bosh. That's it. That is big return in a short time. Safe as 'ouses.
Short-termers
Fine, moving from bricks to other companies - what's happening in the FTSE 100? Man eases ahead as ever. It is a heavily shorted stock so bewarned. Clearly investors are targeting 1700. Centrica is another easing forward and the momentum looks set to continue. With support at 220p - it should not move below 215p if the bullish analysis is correct.
SABMiller has broken through resistance and is now looking at blue-sky to the upside. Morrisons is the same despite some stories about integration of new stores post the completion of the Safeway stores.
If you're looking for the bearish side of things then check out InterContinental Hotels - the momentum is negative. Look especially for a break below support of 500p. Lloyds TSB has fallen sharply and you can see it bouncing off 400p back to 430p. Prudential is another with enough momentum weakness to be pushed lower. GlaxoSmithKline is in a similar position.
Now, just 3 weeks ago it was tough trying to find anything with such price weakness. Some weakness is good if you are an active trader who also takes 'short' positions where you plan to sell in anticipation of buying back cheaper later to close the trade.
The reason weakness is good is it allows you to be market neutral. Find some good long positions and some weak short positions and you should be able to make returns as the market rises or falls.
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