Image source: Getty Images
Wow, we should all hold on to our hats! The Taylor Wimpey (LSE: TW.) The share price soared a whopping 42% in 2023. If you did that every year, we could be millionaires before we know it.
Now, it is clear that this will not happen every year. And we need to put it all in context. The thing is, the stock has simply recouped many of its 2022 losses, but not all. If we add 2022 and 2023, we still see a 16% loss.
What have I done?
But I think the sharp rise in the share price in the last few months of the year does show one thing.
I can imagine investors tapping their heads and asking, “What was I thinking when I sold homebuilder stocks in 2022, when we still face a chronic housing shortage and almost certain long-term demand?“
Well, at least that's what I would think if I had followed the crowd's craze and sold them when the price dropped…instead of buying more when they were super cheap.
But to the great institutions of the City that were only looking towards the next quarter I say one thing. Thank you. On behalf of all the private investors who were able to obtain the long-term riches that you discarded so cheaply.
What goes down…
The collapse of Taylor Wimpey's share price before the start of 2023 was driven by the slowdown in the housing market. I've heard real estate investors tell me that the market can only continue to go up.
But when inflation and mortgage rates caused a setback, we saw how wrong it can be. Even a company with very strong long-term prospects can, as we see, sometimes collapse.
Recent data from Yorkshire Building Society shows that the number of home buyers will fall by 30% in 2023. And that has to hurt any company in the sector.
Why the opposite?
The year's impressive overall increase didn't begin until late October, but why?
I guess it's a combination of two things. First, when interest rates began to fall, people saw some light. And I hope a lot of this is just common sense.
Did anyone think that interest rates would never go down and the housing market would be finished forever? That the profit days at Taylor Wimpey were over? Of course not.
So why did people shy away from stocks for so long?
What to do now?
I still don't really understand short-term thinking. When things I want to buy and hold long-term become cheaper, I buy more and don't sell what I already have.
Taylor Wimpey offers a forecast dividend yield of 6.5% now, which is fantastic. But there is still a short-term risk and it could come under pressure.
I would rate the stock as fair value based on the next two years of forecasts and the two years of risk. But the long term makes me want to add something to my Khaki holding, and I could do that.
