Wednesday, Jun 23, 2010
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Telegraph: Share tip: Buy Grainger despite housing market volatility
Grainger Plc. is Britain's largest stockmarket-listed residential property landlord. Grainger's business is primarily to buy homes worth around £190,000 and let them at levels below market value. It then aims to sell the property on for a higher value once the tenant moves out, or dies, or the asset has been refurbished. This model offers exposure to house price inflation and a market where the supply of homes struggles to meet demand. In addition, it offers this without the heavy capital demands and fragility of building new houses.
Posted by drewster @ 07:25 PM (773 views) Add Comment
4 Comments
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1. drewster said...
Usual caveats apply: This is not investment advice. Do your own research before buying or selling shares.
2. dill said...
A single, and very obvious, miscalculation in their business plan, methinks.
3. drewster said...
dill - You mean the bit about letting properties below market value? Yes it sounds strange, but it also helps keep tenants long-term and thus avoids expensive churn.
This caught my eye: "Despite this, Grainger is trading at a 35pc discount to its net asset value". In other words, the markets think house prices in general need to fall by 35%?
4. dill said...
drewster - I've taken a little time to look over this one as it's never been on my 'radar' before. Directors selling; rights issues; two years of relatively massive pretax losses. Brokers over egging NAV (based on assumption of HPI, I might add) to suit their's and their clients cause. Seen it all before. This company is an accident waiting to happen IMO. Not for me, sorry.
Also. I'm no ethical Investor - but I like to keep some sense of morality.