June 2022


June 2022

Redrow PLC (ticker: RDW) Redrow focuses on housebuilding activities in the United Kingdom. 

The company acquires land, develops and sells residential housing properties. 

The company was founded in 1974 and is based in Flintshire, United Kingdom.

 RATIONALE

Why We Bought in 2021
  • Successful leadership
  • Strong and efficient balance sheet 
  • Quality housing 
  • Versatile product range
  • Expertise in land buying
Why we're reinvesting in 2022
We invested in RDW back in October 2021 after a strong set of results and a dip in share price. The share price dip was caused by a cautious outlook statement by the company's CEO. You can read our full rational for investing back in 2021 here. 

After decreasing in value by about 20% since then, we wanted to take another look at the company to see how its financials are stacking up. 

The company released its half-year results in February 2022, showing an improvement in most of its key financial metrics: 

So why the drop in share price? 
Inflation and rising interest rates usually mean bad news for the housing market overall. This has been reflected in the market, with many house builders taking big hits to their share prices in 2022. Our stock research is now showing most major UK housing companies as undervalued in 2022; this says to us that despite some good results, the market is extremely cautious about the housing market as a whole. 

However, we also believe that this is an opportunity to invest in some fantastic housing companies at attractive prices. Patience is a formidable ally as an investor and even if the housing market does slow or take a dip in the near future, it will rebound eventually. 

RDW is looking even stronger than in 2021 and is still paying a good dividend of almost 5%. So for now, we will gladly take and re-invest our dividends and hold for the long term if needed. 


Conclusion

After some excellent half year results and a 20% drop in share price, we believe we are investing in RDW at a big discount on fair value. The overall housing market is looking undervalued in the UK, which may mean we will have to wait to see returns on this investment. However, with a generous dividend and a long history of success, we are confident that our patience will pay off. 

We will be adding to our investment on Monday morning. 

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