INVESTORS have taken the wrecking ball to housebuilding stocks in the past three months amid fears that the property boom is over.

Barratt has been at the sharp end of the sell-off.

Shares in the housebuilding giant have slumped by two-thirds since February, which last week led to its ejection from the prestigious FTSE 100 blue-chip index.

The situation is a far cry from April when Barratt boasted it would leapfrog Persimmon to become the No 1 builder after completing a £2.2 billion cash-and-shares takeover of its smaller listed rival Wilson Bowden.

Unfortunately, Barratt’s first corporate acquisition for 20 years looks ill-timed in retrospect – increasing the group’s debt pile to £1.7 billion just three months before the housing market in effect fell off a cliff.

Today Barratt’s market capitalisation is lower than its debts and, equally embarrassingly, it is similar to Wilson Bowden’s market value prior to the takeover.

The negative sentiment and fears that market conditions will worsen have triggered rumours that Barratt may bust its banking covenants.

The group is adamant that the rumours are false. The company has a £2.6 billion facility – giving it £900m of headroom. In the worst-case scenario it could simply run the business for cash – putting the brakes on new land acquisitions and slowing construction of new schemes.

Given that the company has a solid land bank, equivalent to five years’ supply, the share-price drop looks overdone on a two to three-year outlook.

But don’t dive in just yet – predators may be circling, but unless a bid comes quickly, Barratt’s exposure to apartments and city-centre developments will continue to put a short-term dampener on the share price.

GKN

LAST week GKN became the latest UK-listed engineering group to see its shares hammered by investors’ extreme nervousness over anything to do with America.

GKN has a substantial business supplying American carmakers and aerospace groups, and when it said last week that US car production was set to be “fractionally lower than expected”, the reaction was as if it had unveiled a full-scale profit warning.

The shares finished the week at 294½p, close to an 11-month low. GKN’s directors may feel a little bruised, but they can comfort themselves with the thought that they are not alone.

Enodis, the food-equipment manufacturer, Invensys, the rail and controls-systems maker, and FKI, the diversified engineering group, have all taken a battering over the past few months because of investors’ worries about America.

Although that nervousness is understandable, the reaction is probably overdone. This is simply because while all these companies have interests in the US, they also have operations in Asia, where business is still brisk.

Grant Ringshaw is away

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