Persimmon shares as safe as houses

Many sectors have been affected by the aftermath of COVID-19 striking earlier this year. For the Persimmon share price it is clear that the housing market remains in a robust state. This concept remains underlined at housebuilder Persimmon, in the wake of the latest Q3 update. The headline here was that average weekly sales were up 38% versus 2019.

This is a spectacular result given the way that the lockdowns so far this year will have undoubtedly slowed down activity. But even so this year has proved to be a big winner for PSN shares, as compared to even before the pandemic began.

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Robust performance for Persimmon shares

The key to the ongoing robust performance is clearly persistent demand, a point witnessed by the way the company said that it has nearly £1.4bn in forward sales for next year. This is up a stunning 43% on the same time last year. With such a pipeline and visibility on earnings, Persimmon shares are rare in terms of leading blue chip stocks to be in such a secure position financially.

 

PSN share price paying dividends

Given the healthy earnings it is not surprising that Persimmon can afford to reward its shareholders. This is particularly so given that the dividend had to be postponed in the immediate aftermath of the pandemic. Therefore, the latest payouts totally 110p are what would have been received last year. To add some cheer for the end of this year Persimmon has promised to pay another dividend by Christmas. All of this sounds relatively straightforward given the way that the company was sitting on nearly £1bn in cash by the end of last month.

 

How to trade shares with ATFX

Looking to trade Persimmon shares and other major company shares? Open a live or demo account with ATFX to get up to speed. Start trading now to benefit from competitive spreads, high-quality trade execution, and no commission.

1. Register for an account or log in to your existing account

2. Open MT4 either on your desktop or mobile

3. Search for Persimmon shares in the market watch or symbols window

4. Choose your position size

5. Hit buy or sell, and then confirm the trade

 

Persimmon share price: Shooting for pre-pandemic highs

However, despite the shares trading near post pandemic highs of 2,855p, they are still well off the initial peak of the year achieved in February at 3,328p. While this may be regarded as an opportunity, given the fundamental achievements of the group since the March lockdown began, it is nevertheless something of a mystery.

 

Persimmon shares pipeline

On the basis of the pipeline, and the cash in the bank one would suggest that the share price of Persimmon should be much higher. This is at least said on the basis of the sales and booked orders. Indeed, the only real fundamental clouds on the horizon may be that of land supply.
This metric was one not really noticed by commentators in the wake of the Q3 update. So far this year Persimmon has secured 1,700 plots. Last year it had 7,300. The implication is that with much less land going forward the company’s capacity to build may be constrained. Part of the cure initially will no doubt be to raise prices, but this can only be seen as a temporary measure.

To see all upcoming news and data releases that’ll have an effect on the financial markets, check out our Economic Calendar. It’ll cover all major releases from global economies and give you the exact time the release is due, the previous data, forecast data and actual data (once released).

 

Persimmon share price: daily chart

Looking at the daily chart of Persimmon over the past year it can be said that the journey for the PSN share price has been typical of the trajectory for many blue chips. This has taken the form of a decline from February and then a partial recovery since March. The key area of resistance is August’s 2,855p, a zone which could be attacked towards the end of 2020 in anticipation of a promised dividend payout.

Daily chart analysis showing Persimmon share price daily movements for 2020

 

Risk management

Looking to learn more about risk management and how it can benefit your trading? Check out our Risk and reward ratio article for more insight.

Take the opportunity to develop your risk management strategy. Understand five key risk management techniques to help you look after your funds.

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