Construction may not be the most stylish sector to invest in, but it’s fundamental for the future growth of the economy. You see construction everywhere — there’s always a new housing development, hospital or office block being built. Construction isn’t all hard hats and high vis jackets — it’s a very broad term that refers to every stage in the process, as well as the companies that provide materials or manufacture the tools required.
Construction markets are cyclical, so they’re not on constant upward trends and instead move in a cycle. As the economy grows, construction has a boom, but the reverse is also true.
Cyclical stocks are ones that tend to do well when people are spending money on “wants”, as well as needs. This tends to be at the early to mid stages of the economic cycle.
Some UK stocks include:
We’ve listed some examples of construction stocks with more information about them, and you can see an A-Z list below if you’ve got any in mind.
Taylor Wimpey is a UK construction business based in High Wycome that builds residential homes. It is listed on the London Stock Exchange and is part of the FTSE 100. In the first 6 months of 2021, Taylor Wimpey built more than 7,000 new homes.
Balfour Beatty is a British infrastructure company based in London. It’s currently working on the HS2 and Crossrail. In 2018, Balfour Beatty was named the biggest construction company in the UK – it’s part of the FTSE 250.
Ameresco is a renewable energy asset developer, owner and operator. It deals with infrastructure in North America and the UK. Ameresco completes energy saving and environmentally responsible projects.
Investing in construction isn’t just about the physical build – you can invest in companies that manufacture machinery used in construction, as well as material suppliers — those bricks have to come from somewhere! You can also invest in companies that design and build residential homes from start to finish.
With so many cogs in place, construction is a well-oiled machine and tends to perform quite well, but not consistently. You need to make sure that you’re aware of the risks involved, such as the upfront costs and the risks of poor workmanship, as well as the fact that it’s a cyclical stock.
All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.
If you’re considering adding some construction stocks to your portfolio, make sure that you’ve done your research and know which stage in the economic cycle the sector is currently sitting in — this will help you manage your expectations for profits and dividends. Look into the projects that the companies are working on and look into their timescales, whether they’re in debt and if they pay dividends.
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