I’m looking for stocks to buy to boost my holdings. Two options I currently like are Persimmon Homes (LSE: PSN) and Barratt Developments (LSE: BDEV).
Persimmon Homes
Persimmon is the UK’s second-largest house builder. It targets the lower-priced segment of the new home market, making it popular amongst first-time buyers.
As I write, Persimmon shares are trading for 1,130p. At this time last year, the shares were trading for 1,875p, which is a 39% drop over a 12-month period.
Should you invest £1,000 in Barratt Developments right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Barratt Developments made the list?
It is worth noting that many UK shares have fallen due to soaring inflation and rising interest rates. Many of the stocks to buy on my watch list have fallen, creating some excellent buying opportunities.
At present, Persimmon shares look great value for money on a price-to-earnings ratio of just six. In addition to this, its dividend yield stands at 5%. I am aware that dividends are never guaranteed.
Persimmon can capitalise on the favourable housing market in the UK over the longer term, as can Barratt Developments. There is a chronic housing shortage in the UK and demand is rising. Future earnings could be boosted and investor returns could increase.
Finally, I like Persimmon’s business model. It has a diversified set of operations. In addition to its house building, it has subsidiaries that manufacture and supply construction materials too. This should also boost earnings and returns.
Barratt Developments
Barratt is the UK’s largest residential property developer. Like Persimmon, it targets the first-time buyer market but also has a subsidiary that targets higher net worth clients with more luxury builds.
As I write, Barratt shares are trading for 448p. At this time last year, they were trading for 489p, which is a 8% drop over a 12-month period.
Barratt shares also look like good value for money right now on a price-to-earnings ratio of just eight. Its dividend yield is higher than Persimmon, currently at 7.8%.
The additional aspect to Barratt’s appeal is the fact that it also makes luxury housing. No matter the economic outlook, higher net worth individuals aren’t usually affected and spend as they usually would. This additional diversification is appealing to me as a potential investor.
My stocks to buy have risks too
Both Persimmon and Barratt could see short-term performance impacted by interest rate hikes. This is because the rate hike has impacted mortgage rates adversely and obtaining a mortgage has become tougher. I do view this as a short-term issue and believe the longer-term demand for housing in the UK should trump the current stormy waters.
In addition to the interest rate hikes, there are real fears of a looming housing market crash due to the harsh economic picture currently. The last time this happened, both Persimmon and Barratt were in an ominous position financially. I’m not too worried this time around because they both have substantially stronger balance sheets that could cope if this were to happen now.
Overall, I would be willing to buy Persimmon and Barratt shares if I had the spare cash to do so. They both look good value for money and present a good passive income opportunity. In addition to this, the general housing market in the longer term seems favourable and ripe for both businesses to boost their earnings and provide stable returns.
