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Taylor Wimpey (LSE:TW) stock appears to be an unmissable buy in recent weeks and I was eager to add it to my portfolio. Unfortunately, I didn’t have any cash, and while I waited, the rest of the market woke up to the opportunity.
Taylor Wimpey’s stock price has skyrocketed 10.92% in the past week, which means it’s not as cheap as it used to be. So what should I do now?
I love buying undervalued FTSE 100 stocks, especially when they come in with great results. Taylor Wimpey fits the bill, trading around six times earnings while paying 8.27% a year in earnings. It’s at the top of my buy list.
More expensive (but still cheap)
Taylor Wimpey’s shares have fallen 34.55% over five years as fears of the UK property bubble grow, although they are only down 3.61% over 12 months. Rival Persimmon fared much worse, dropping 52.7% for five years and 34.72% for one year.
Taylor Wimpey looks a more solid proposition than Persimmon, which issued a profit warning in March and slashed its dividend by three quarters. Management has a policy of returning 7.5% of net assets to shareholders annually, which will amount to at least £250 million a year.
That policy stands despite today’s challenges and Taylor Wimpey is expected to earn 8.05% this year and 8.06% in 2024. These are already inflation-busting levels of income, and the gap will only widen as consumer prices continue to fall. I might get share price growth on top of that too because prospects are bright.
So I had mixed feelings when the June inflation number came in lower than expected by 7.9% on July 19 and the FTSE 100 jumped 1.8%. Taylor Wimpey is up 6.8% and my heart sinks with the same percentage. I have phoned stock correctly, but unable to act due to lack of cash.
Should I accept that I missed it and look for other FTSE 100 offers? I am not sure.
There is still time to buy it
Even though Taylor Wimpey’s share price is up another 1.38% on July 20 so far, I wouldn’t call it expensive, trading at 6.19 times earnings while yielding 7.97%. Yes, it was cheaper before but it’s an investment. It’s rare to buy a stock at such a perfect time, and when it does, it’s mostly down to luck.
The June inflation numbers were a real boost for sentiment, and things may get even better in July, when markets expect inflation to drop below 7%. If they are right, mortgage rates could fall and Taylor Wimpey’s stock could rise again.
The stock could easily fall before then. We are likely to see a gains fight picking up over the next few days. The Bank of England may deliver an aggressive base rate hike at its next rate-setting meeting on August 3. Taylor Wimpey or any other home builder can deliver some unexpected bad news. If that happened, the stock would be cheaper and I would get my shot.
I have absolutely no idea where the stock will go next. Nobody ever does. The only thing I know is that Taylor Wimpey stock still looks cheap and the dividend looks unmissable. I think the best time to buy stocks is when I have cash. Hopefully, it won’t be long now.