Investors Told to be Cautious of Firms Focused on Sales
Investors have been told that shares in firms such as Foxtons, Zoopla and Rightmove could prove a viable investment, but that Countrywide looks the strongest.
This advice arrives due to doubts surrounding property sales, but a positivity in the lettings sector.
Investment website The Motley Fool’s James Skinner says: “A combination of higher rates and a stricter regulatory approach to mortgage affordability will see many people’s prospects of homeownership reduced, and that this will probably see ever greater numbers driven into the rental market as time elapses.
“For Countrywide, with its almost even split between estate agency sales and residential lettings, this is good news.”
He adds that Countrywide’s letting agency purchases should give it an “effective hedge” against a slowdown in sales.
He believes that Foxtons is less preferable than Countrywide due to its focus on sales and because it is based predominantly in London.
Skinner says that this could pose a problem if changes to Stamp Duty are more negative than initially thought.
Of Rightmove and Zoopla, he says: “While I believe that all of these businesses would prove to be at least a reasonable investment over time, many will remember that it was a Countrywide consortium that created Rightmove back in 2000, while the firm also still holds two boardroom positions and a sizeable stake in the recently listed Zoopla.
“Given that these two digital wonders are both, in one way or another, products of Countrywide’s innovation, I can’t help but suspect that it is Countrywide which is the better investment of them all.
“Certainly, with it presenting as the cheapest of the bunch at present, it would appear to be almost a no-brainer for those who are looking to invest only in the one company.”1
The advice comes as Deutsche Bank raised its target for Zoopla to 240p, causing Zoopla shares to surge on Friday. Meanwhile, JP Morgan downgraded Rightmove from a large rating to neutral.