Forums General Discussion Am I Doing Something Wrong?

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  • Dan WilsonDan Wilson Member
    Post count: 15

    Hi Guys,

    I’m new to the forum and investing.

    I live in England and I’m currently going through the FTSE 250 to see if I can find any companies that may be undervalued.

    I have just come across Bellway PLC (ticker = BWY) and have the following two questions:

    At first glance this looked like a good company to invest in as the P/E*P/BV was only 7.94, the debt/equity is 0, the current ratio is 4.21 and the BV, EPS & dividends have been steadily increasing over the past 10 years.

    Happy with this I went to the intrinsic value calculator and typed in the numbers which gave me a intrinsic value of approx. £48 per share.

    The question I have is why is the market price of £2,840.00 per share?

    I changed the interest rate to get the intrinsic value of the calculator to match the current market price and the interest rate was -33.75%. Does this mean if I was to invest in this business now I would make a 33.75% loss per year?

    Thank you in advance.


    Ross KingRoss Newbie
    Post count: 3

    Hi Dan

    Market prices in the UK are quoted in pence. This differs from the US. The stock price is currently £28.25.

    The stock looks cheap based on purely the valuation. The balance sheet is strong. What do you believe will keep the business earning high returns on capital?


    2 users liked this post.
    Dan WilsonDan Wilson Member
    Post count: 15

    Hi Ross,

    Thanks for the reply!

    I can’t believe I didn’t know that the UK market prices are in pence, I guess that’s one of the basic points I missed.

    I don’t know if it has a competitive advantage, I was just looking at the numbers.

    I will investigate further and comment whether or not I think it has a moat.



    David FloodDavid Moderator
    Post count: 207

    Hi there Dan,

    I’m based in the UK too.

    Bellway does not have a moat, non of the house builders have moats.

    House builders in the UK have done well over the last decade thanks to record low interest rates and the Help to buy scheme driving house purchases.

    These types of firms are cyclicals and buying them at the tail end of a bull market when a recession is around the corner is a sure way to lose 50% of your investment. Cyclicals should be bought when the bear market bottoms out and the recessionary enviroment gives way to growth as the economy begins to recover.

    Buy Peter Lynch’s books 2nd hand on Amazon and read what he has to say about cyclicals.



    1 user liked this post.
    Dan WilsonDan Wilson Member
    Post count: 15

    Hi David,

    Thank you for the advise.

    I’ll be sure to get a copy of the book mentioned above.

    I haven’t invested in Bellway, or any other company for that matter,as I believe the mother of all recessions is on the horizon.

    I am currently moving into cash from real estate investments I made 6/7 years ago to try and take advantage of any decline in the market.

    Thank you all for the valuable insights and keep up the good work.



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