Taylor Wimpey returns to dividend list and Renishaw puts itself up for sale

“US markets bounced back with gusto last night, including a 3% rally in the tech-heavy Nasdaq index. Asia markets had already seen a decent showing on Monday and they did their best to sustain this momentum on Tuesday, but the gains turned to losses towards the end of the session for Hong Kong. The Hang Seng index traded 1.2% lower with banks, insurers and construction companies dragging down the market,” says Russ Mould, Investment Director at AJ Bell.

“In the UK, the FTSE 100 was flat at 6,590 with a selloff in oil stocks offset by strength in consumer goods, financials and pharma.

“Testing group Intertek was among the top risers after its full year results show the business to be more resilient than many people had thought. Its shares have been drifting since October but perked up 2% on the results.

“Gold remained out of favour despite ongoing concerns about inflation. Investors often buy the metal as a hedge against inflation, yet this playbook doesn’t appear to be working this year given how gold has fallen by more than 7% in the past 30 days to $1,724 per ounce.”

Taylor Wimpey

“In many respects Taylor Wimpey’s 2020 results are in the rear-view mirror and investors are looking at the open road ahead and liking what they see on the sales outlook and dividends.

“While the numbers themselves bear big scars from the property market deep freeze at the start of the pandemic, the market is more interested Taylor Wimpey’s positive start to 2021 and just how strong its balance sheet is after a period in which the company prioritised preserving cash.

“Taylor Wimpey, like several of its peers, was also busily buying land from May last year. This investment should result in a big pay-off down the line – as houses built on land bought at depressed values will be more profitable when sold.

“With Chancellor Rishi Sunak widely expected to announce support for first-time buyers in tomorrow’s Budget there is little sign that the helpful political environment housebuilders like Taylor Wimpey have enjoyed for several years is about to disappear.

“The UK needs more houses to be built and to do that it needs a healthy housebuilding sector. Taylor Wimpey, for one, seems to be in rude health.

“Though the company’s decision to allocate more funds to fixing fire safety issues raised in the wake of the Grenfell disaster and its increased focus on environmentally-friendly builds shows this privileged position comes with responsibilities.”

Renishaw

“The UK stock market is battling an identity problem with critics saying it lacks exciting companies at the cutting edge of technology and science, particularly among larger cap stocks.

“News that precision engineer Renishaw has put itself up for sale is a further blow to the UK market if it results in a sale to a third party that subsequently delists the business.

“Its shares have often been too expensive for many investors to show interest, but should it agree a sale then one can imagine the same reaction as when Arm Holdings was taken over in 2016, namely the sad loss of a superb business on the market.

“Takeovers may net investors a small premium to the market price, but they can also deny them substantial future gains if the shares were retained.

“The issue with Renishaw is that its shares already command a high valuation so any potential suitor would have to pay top dollar to buy the company.

“There is also the factor that the two founders, holding sway over 53% of the business including stakes owned by connected parties, only want to sell to someone who would respect the heritage and culture, and commitment to local communities where it operates.

“One could imagine an Asian company would be interested in owning Renishaw, but such a buyer may have different views on whose culture should prevail.”

These articles are for information purposes only and are not a personal recommendation or advice.