I think one of the best stocks to buy now is Berkeley Group (LSE: BKG), which is why I’d invest £2,000 in this top share today.
There are a handful of reasons why I think this is one of the best companies on the market right now. First of all, the UK housing market is suffering from structural undersupply. What’s more, record low interest rates have made mortgages more affordable. These twin tailwinds have sent home prices skyrocketing over the past 12 months.
In fact, this trend has been in place for more than a decade, and I think there’s a good chance it’ll continue.
Even if interest rates increase in the years ahead and the number of properties built around the country jumps, the market has been undersupplied for years. As such, it could take years to rectify this issue.
Additionally, Berkeley’s core London market benefits from strong demand from overseas buyers. The amount of space in the capital is also limited, which is another factor pushing property prices higher.
One of the best stocks to buy now
These are not the only reasons why I believe this is one of the best stocks to buy now. It’s also well managed, prioritises shareholder returns, and is investing in new land to help support future growth.
Berkeley’s land holdings have the capacity to deliver over 63,000 homes, of which over 70% are on 29 large complex regeneration sites. Twenty-three of these are now in production.
Last year, the group added 10 new sites to its land holdings and has promised to return £450m to investors this year with a B share scheme and regular dividend.
According to its results for the year ended 30 April, the company’s pre-tax profit jumped 2.9% last year. The average selling price of its properties rose from £677,000 to £770,000, and the group ended the year with more than £1.1bn of cash.
These numbers suggest the business is seeing strong demand for its newbuilds, has a strong balance sheet, and is investing in the future.
There are only a few companies on the market that I think have such a strong balance sheet and future growth potential. That’s why I believe this is one of the best stocks to buy now.
Risk vs reward
Some of the primary risks and challenges the group may face in the years ahead include the proposed increase in corporation tax. This could increase the company’s tax bill, leaving less money for shareholders and forward investment. An increase in interest rates may also dent property demand. Other tax changes, such as the stamp duty surcharge for overseas buyers, may dampen demand in the London market.
However, for the reasons outlined above, I believe Berkeley should continue to see growing demand for its properties as we advance. That’s why I think this is one of the best stocks to buy now and I’d invest £2,000 in the company today.
Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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