Financial expert Edmund Shing explains why now is the perfect time to invest in UK housebuilder Berkeley Group.
1) FTSE 100 company
Berkeley Group is a FTSE 100 company (UK code: BKG) and is a housebuilder.
2) It's cheap
Shares in Berkeley Group are very cheap right now. According to Stockopedia it trades at an 8.01 P/E Ratio (TTM), which is nearly half that of the FTSE 100. And yet it is very profitable.
3) Upmarket houses
Berkeley Group is concentrated in London and the south-east with it's housebuilding. It's also more upmarket than other housebuilders with the average price of a house they sell is nearly £500,000 ($707,000, €652,000).
4) Short term fears
In the short term, housebuilders like Berkeley have been effected in two areas. Firstly, foreign investors in London who are worried about a potential Brexit (Britain leaving the European Union) in the 23 June EU referendum. Secondly, the changes to buy-to-let taxation that are being put in place by UK chancellor George Osborne in the upcoming budget.
5) Long term gains
Despite these worries, shares in Berkeley Group present an excellent income opportunity. Berkeley pays a fantastic dividend , with a 6.6% dividend yield according to Stockopedia, much higher than the overall market.
Edmund Shing is Global Head of Equity Derivative Strategy at BNP Paribas in London. He holds a PhD in Artificial Intelligence.