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Most value investors have been interested in UK stocks recently. And especially house builders have been attracting the attention of international fund managers.
Another example is this Bellway (LSE:BWY). The stock trades at a price-to-book (P/B) ratio of less than 1, but a look at the company’s track record actually paints a pretty good picture.
UK building houses
The housing shortage in the UK has long been well documented. And within this promising market, Bellway occupies an interesting position.
The average selling price is average Persimmon again Barratt Redrow. This puts you in a position to attract both premium buyers who trade in a crisis or people who trade in a booming market.
The company also has an outstanding reputation for quality. It has maintained a 5-star rating from the Home Builders Federation for nearly ten years, and was named the Largest Home Builder of the Year in 2025.
In short, Bellway offers customers high-quality properties at low prices. And whether it’s the stock market or the housing market, that’s an attractive combination.
Growing up
Bellway’s share price hasn’t gone anywhere over the past 10 years, but investors should keep an eye on the business. Revenue growth was slow, but the firm’s book value increased rapidly.
In 2015, the difference between the company’s assets and liabilities was £1.5bn. Fast forward to 2025 and the gap has more than doubled to £3.6bn, despite stagnating prices.
Another reason for this is the way the company looks at its balance sheet. Bellway tends to be more resilient than other housebuilders during downturns, but this comes at the expense of revenue growth.
That may not be a bad thing in the long run. But there is another reason for the difference between sales growth and book value growth that is more concerning.
Goods
Like most homebuilders, most of Bellway’s assets are inventory – this is essentially a world bank and its work is ongoing. And this is something investors need to be aware of.
Rising inventory levels can be a good thing. Homes aren’t built overnight, so companies need to have buildings ready to go if demand suddenly rises – and that’s what inventory provides.
However, there is a danger. It can be a sign that properties aren’t selling and having cash tied up in stock limits the company’s ability to invest in growth or return cash to shareholders.
Bellway’s strong reputation for managing its balance sheet may mean it gets the benefit of the doubt. But high inventory levels make the weak housing market a big problem.
A gift for serious investors?
There are obvious reasons to be interested in the UK housing sector at the moment. And Bellway has a well-earned reputation for maximizing its book value while carefully managing its risk.
Despite this, I think investors need to tread carefully. Growth assets represent potential future growth, but require the market to be strong enough to turn that into cash.
That’s why my choice in the industry is The Vistry Group. Focusing on relationships with real estate providers, rather than selling on the open market, helps reduce the build-up of excess inventory, which is why it’s a stock I buy.
