Thursday, December 27, 2007

Savills, the estate agent, has seen its share price collapse from 701p to 282¼p this year on fears of a house price slump but I picked some up for my self-invested personal pension (Sipp) on Wednesday at 271p.

· Tips of the year 2008

Even at the slightly higher closing price, the shares offer a forecast yield of 6.4pc and a price earnings ratio somewhat lower than that. On the calculation basis used for our share prices page, the stock is yielding 8.4pc on a price earnings ratio of 4.3pc.

That looks cheap for a good quality business with international diversification - including eastern European emerging markets, where economic growth and property prices remain robust. Elsewhere, Savills' American exposure does not seem to be at the 'liar loans' and trailer park end of the market where setbacks may prove most severe.

Closer to home, more than 1.4m fixed-rate mortgages will expire next year and the credit crisis will make it more difficult for these homebuyers to find new loans. That might support demand for Savills' brokerage services.

Even if the long-awaited house price collapse arrives in 2008 - which I think unlikely at current interest rates and unemployment levels - the yield on this stock offers substantial comfort.

Source:- http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/12/27/cctips327.xml