One of the hardest parts of investing is trying to determine which companies to focus on. For every potential strategy, there are hundreds of investment options within the FTSE, so it’s essential to select the best shares to analyse.
I often find that looking at the companies that are being most searched for by investors can point me in the right direction.
For that reason, I looked at the top 10 most-searched-for investments. These are companies that UK-based investors looked at over the last 24 hours. From this list I found a company that could be suitable for my portfolio. This list outlines companies that have piqued the interest of investors, and could indicate that an investment opportunity is possible.
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The company on the list that first drew my attention was Redrow (LSE: RDW), a residential housebuilder primarily operating throughout England and Wales. The company’s share price has struggled over the last few years, down 43.3% in 2022. Furthermore, the company also trades at a significant discount from pre-pandemic levels, down 52.9%.
Share price struggles
This fall in share price may have attracted some interest in the company and be behind the increase in searches for Redrow. The share price fall itself appears to have stemmed from a recent broker update. Deutsche Bank cut its price target for the company’s shares to 499p from 784p, although it reiterated its ‘buy’ rating.
I also think it’s important that this new price target is still a 25% increase from current levels. It is likely that this target level, combined with the downward trend in share price, it what has drawn interest from UK investors.
Strong underlying fundamentals
Despite these intriguing characteristics, it is important to look at the underlying fundamentals of the company. Interestingly, Redrow’s reported earnings per share have increased considerably from the 2020 financial year. In addition to this, the company’s turnover has now reached its highest level on record.
This increase in earnings, combined with significant falls in the share price, means the price-to-earnings (P/E) ratio has fallen to almost a third of 2020 levels. Redrow now has a P/E ratio of just 4.2, putting it below the housing sector average of six.
Future headwinds
Despite this, I should not to ignore the reasons why the share has fallen out of favour with the market. Given this company is a housebuilder, there are several sector-wide risks. These include reduced demand, and house price falls, both of which could cause the share price to decline further.
Nonetheless, I believe this approach of looking at the most popular company searches by UK investors has helped me identify a promising opportunity. Redrow’s fundamentals indicate good levels of cash generation, low debt, and even a high dividend yield of 8%. For this reason, I would add Redrow to my portfolio once I have the funds.
