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With the S&P 500’s three most valuable companies each worth more than the entire FTSE 100, it’s easy to see why UK shares are often overlooked. But with uncertainty over how artificial intelligence (AI) will affect our lives, could the lack of tech stocks among Britain’s index of leading blue-chip companies actually be its strength?
And has the time come to consider a company that’s operating in an industry that’s been around for over 10,000 years? Let’s take a closer look.
Ups and downs
Suffering from post-pandemic supply chain inflation, rising mortgage rates, and a squeeze in consumer incomes, Persimmon’s (LSE:PSN) share price has been on the ropes.
And over the past three years, there have been a number of false dawns in the new-build housing market. A combination of stubborn inflation, interest rates failing to fall as fast as hoped, as well as general economic uncertainty, has quickly delayed the green shoots of a recovery.
The topsy-turvy nature of the sector is best illustrated by the S&P Global UK Construction PMI (Purchasing Managers’ Index), a monthly survey of over 150 companies. A figure above 50 indicates expansion. The last time it was above this level was in December 2024.
Unsurprisingly, Persimmon’s share price has broadly matched movements in the PMI since January 2023.
Uncertain times
However, although I’m not going to predict when, I think the housing market will recover. That’s because history suggests it will.
Indeed, there’s a chronic under-supply of properties at the moment. And the desire for first-time buyers to get on the housing ladder appears to be as strong as ever. If disposable incomes grow and consumer confidence starts to pick up, I reckon Persimmon will be one of the first to benefit because it has a lower average selling price than its closest FTSE rivals.
| Company | Average selling price (£) |
|---|---|
| Persimmon | 278,000 |
| Vistry Group | 283,000 |
| Taylor Wimpey | 313,000 |
| Bellway | 316,412 |
| Barratt Redrow | 343,800 |
| The Berkeley Group Holdings | 570,000 |
And the recent turbulence affecting data and software stocks reminds us that the winners and losers from artificial intelligence (AI) might not be as obvious as we first thought.
Until the picture becomes clearer, now could be a good time to consider investing in old-fashioned industries such as mining, banking, utilities, and construction. The sort of stocks that dominate the FTSE 100 and, a bit like Persimmon, have established a reputation for paying healthy dividends. At the moment (9 February), the housebuilder’s yielding 4.3%.
Could AI be a problem?
But I’m not naïve. I know the construction industry isn’t immune to the impact of AI. However, it looks to me as though it’s going to be one of the net beneficiaries.
When it comes to building, AI’s likely to lead to back-office efficiencies, the optimisation of project planning, safer sites, and better build quality. Further evidence that the technology might not be as disruptive as feared is that jobs in the sector often appear among the lists of careers that are least likely to be impacted.
Final thought
With its healthy balance sheet (it has no debt) and large land bank, I reckon Persimmon’s a stock to consider. In my opinion, it looks well positioned to benefit from a housing market recovery.
But even if it’s delayed or stalls once more, the stock’s above-average dividend (no guarantees, of course) could appeal to income investors. Suddenly, an ‘old-fashioned’ stock could become trendy.
