“Underperformance” makes Travis Perkins an attractive investment opportunity

Published:  27 September, 2018

Travis Perkins’ “underperformance” has prompted an asset management group to increase its shares in the hope it has potential to improve over the long-term.

Investec’s shares in the builders’ merchant rose from 4.97% to 5.05% after it purchased them on the open market.

The company says that the current slowdown in the construction industry means that shares are especially low in cost, with potential to provide better returns as the market speeds back up in the future.

Alastair Mundy, Head of Value Investment, explained that the reason the company decided to do this was because it uses a “value-driven investment process”.

He said that it seeks to invest in “cheap, out-of-favour companies which have the potential to improve over the long-term”.

According to Mundy, Investec had used “the continued underperformance of Travis Perkins as an opportunity to increase [its] position in the company” and that he was hoping to see Travis Perkins, which is “well-invested market leader”, starting to perform better.

He explained that the UK repair, maintenance and improvement market was not performing as he had hoped, likely as a result of continued low level of housing transactions, which typically drive home improvements.

This means that shares are currently so lowly valued that little RMI recovery is required to make the company an attractive investment opportunity.

All shareholders have the opportunity to vote and give feedback during Annual General Meetings, and Investec will have no more power than before in influencing Travis Perkins’ strategy.

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