Housebuilders were propping up the FTSE 100 on Friday after a broker downgrade for two of the sector’s biggest names.
Liberum said the UK housebuilding sector had “a wall of worry to climb”, although it went on to describe the risks faced by the sector as “all known and fairly limited” as it reshuffled its ratings in the sector.
Barratt Developments was among the biggest fallers on the FTSE 100 after Liberum cut its rating on the stock from “buy” to “hold”, a move made on valuation grounds. Charlie Campbell, Liberum analyst, said: “We no longer see enough upside to our price target [of 498p per share].
“To be more positive on the stock we need greater clarity on volume ambitions beyond 2016 and returns to rise more quickly.”
Barratt’s shares fell 2.2 per cent to 460.3p.
There were also losses for Bovis Homes, down 0.6 per cent to 860p, after Liberum also cut its rating on the mid-cap residential developer from “buy” to “hold”.
“We have lost our nerve slightly on Bovis’ volume growth potential as sales rates are likely to slow in 2015,” said Mr Campbell. “A positive investment case requires a rising capital turn to transform leading margins into returns at least in line with the sector. We believe that slower sales rates may impede progress on this front.”
Persimmon, the UK’s biggest housebuilder, slipped 0.4 per cent after the note named it as Liberum’s “least preferred” pick in the sector, although it kept its “hold” rating on the shares.
“The stock market needs no reminding that Persimmon was the only builder not to issue equity in the recovery, nor that it was an early adopter of the capital return model, but its many qualities are very well known now,” said Liberum. “This leaves some downside to fair value in our view as the rest of the sector catches up in returns and there are many offering more generous dividend payouts.”
Overall, the FTSE 100 was 0.3 per cent lower at 6,843.37, with demand for financial companies on hopes that a deal would be reached between Greece and its creditors offset falls among consumer stocks.
Barclays led the banks higher, up 0.7 per cent at 250½p. Aberdeen Asset Management gained 1.6 per cent to 437.6p.
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