After soaring in value by more than 20% in the last quarter of 2023, a pull back of some magnitude was to be expected at the start of this year for our PIN Fund (a fictional fund of 10 listed property-related companies). The Fund made a loss of 5.3% in the first quarter, compared to the FTSE 100 rising by 3.1% during the same period.
On a side note, the FTSE 100 is now hovering around the 8,000 mark and regular readers might remember our Historic Ratios article at the start of this year, which predicted that the FTSE should rise to the mid-8,000s this year and that the price of Brent Crude looked far too cheap at $77/barrel, predicting that it should rise to $99/barrel this year. It was trading at more than $91/barrel at the time of writing (‘yeah, yeah, even a broken clock is right twice a day’ I hear you say).
Back to the Fund, and despite the past three months, it has performed reasonably well over the past 12 months, returning 7.9%. However, the five housebuilders in our Fund have clearly outperformed, returning 17.5% during the same period. The big losers over the past year have been our two self-storage companies, with Safestore Holdings (-16.8%) and Big Yellow Group (-4.4%), suffering from rising interest rates and households looking to trim their non-vital expenses, which includes selling, rather than storing, those extra sofas, beds, tables etc.
In the next PIN Fund review (in July) we will celebrate the 10-year anniversary of the Fund and there will be a rather large shake-up of the companies included in the Fund, with some leaving and some new entrants breathing fresh air into it. Diversifying the Fund over the years has worked well thus far and there are plenty of beaten down commercial property companies that look to be turning a corner…more on that next time.
A monster housebuilder on the horizon
The big news in Q1 was the announcement that Britain’s biggest homebuilder Barratt has agreed to buy smaller rival Redrow in an all-stock deal valuing it at about £2.5bn. Should the deal go through, the newly named ‘Barratt Redrow’ aims to deliver more than 22,000 homes each year in the medium term, which is around 60% more than the 14,000 homes Barratt expects to deliver by itself in fiscal 2024 and have an annual turnover in excess of £7bn.
