The FTSE 100 managed to advance nearly 2% final month. And that’s regardless of the Persimmon (LSE:PSN) share price going down 14%. 

November was a nasty month for shares in home constructing firms. However that doesn’t even start to elucidate why Persimmon misplaced over a fifth of its market worth. 

Studies

Earnings reviews can typically be a significant catalyst for share price adjustments. And so it proved with Persimmon, with the corporate’s newest replace going throughout fairly badly with buyers.

Issues weren’t all dangerous by any means – demand seems to be robust and orders have been up 17%. On high of this, UK mortgage approvals have simply hit their highest ranges in two years.

That’s an excellent factor, however it in all probability doesn’t matter a lot if Persimmon isn’t capable of make any cash from it. And that’s the problem the corporate recognized. 

The agency indicated it expects greater prices in 2025 from a mixture of inflation, new constructing rules, and the Finances. That’s why buyers despatched the inventory down 8% in response.

Competitors

Arguably, the very last thing any agency wants after warning about future prices is one other firm instantly providing a extra constructive outlook. However that’s precisely what occurred to Persimmon.

The day after Persimmon’s report, fellow FTSE 100 builder Taylor Wimpey provided its personal replace. And it gave no indication of upper prices weighing on earnings both this yr or subsequent.

There are a few methods of viewing this, however neither is sweet for Persimmon. One is that its value challenges are particular to the enterprise, somewhat than the broader business.

The opposite is that Taylor Wimpey buyers are in for a shock. That could be dangerous for them – and we’ll see subsequent yr – however it’s no assist for Persimmon’s shareholders 

Purchase the dip?

I’m not going to maintain anybody in suspense right here – I’m not shopping for shares in both Persimmon or Taylor Wimpey. They give the impression of being low cost and have enticing dividend yields, however I’m staying away.

One of many key classes of 2024 is to not low cost regulatory dangers. Buyers in Lloyds Banking Group knew in regards to the automotive loans investigation since January, however ignoring it has proved unwise.

The Competitors and Markets Authority (CMA) is wanting into a lot of builders in the mean time, together with Persimmon and Taylor Wimpey. The potential challenge is collusion.

What they may discover I don’t know. However following Lloyds shares this yr (I’m not an proprietor) is sufficient to make me assume the chance simply isn’t value it. 

Persistence

As soon as the CMA investigation concludes, I’d actually be keen to take one other take a look at the home constructing business. And the final month has been attention-grabbing from that perspective.

Except for that huge unknown, I feel there’s quite a bit to love in regards to the UK builders. So I’ll be watching carefully over the subsequent yr or so for brand spanking new developments. 

I’ve traditionally tended to consider Persimmon as a riskier wager than a few of its friends for a number of causes. And whereas I’m open to altering that view, the final month has largely bolstered it.