Yet Another Value Podcast - UK Homebuilders with Christian Olesen from Olesen Value Fund

Episode Date: December 29, 2025

Christian Olesen of Olesen Value Funds discusses the opportunities in UK homebuilders. The discussion centers on why the UK equity market remains deeply out of favor and how this pessimism has created compelling value in residential developers. Christian outlines the cyclical dynamics driving depressed demand, explains why Bellway stands out among peers, and explores balance sheet strength, land valuation, and downside protection. The conversation also addresses macro concerns around the UK economy, housing affordability, planning regulations, and management incentives. __________________________________________________________[00:00:00] Episode and guest introduction[00:03:26] UK market deeply discounted[00:05:13] Cyclical demand collapse explained[00:08:20] Bellway valuation framework[00:11:47] UK macro risk debate[00:15:09] Domestic investor pessimism[00:17:37] Quantitative versus qualitative thesis[00:21:15] Land write-down risk discussion[00:26:58] Bellway versus peers[00:30:41] Management incentives concerns[00:32:43] Capital allocation changes[00:38:53] American investor influence[00:41:08] Alternatives within UK market[00:45:23] Planning reform tailwinds[00:46:58] Supply constraints implications[00:49:35] Risk-reward summaryLinks:Yet Another Value Blog - https://www.yetanothervalueblog.com See our legal disclaimer here: https://www.yetanothervalueblog.com/p/legal-and-disclaimerProduction and editing by The Podcast Consultant - https://thepodcastconsultant.com/

You're about to listen to yet another value podcast with your host, me, Andrew Walker. Today's podcast is a really interesting one. I have Christian Olson from Olson Value Funds on. He is going to talk about the opportunity in UK home builders in general and Bellway in particular. I think you, from a just quantitative value perspective, I think you're going to be really interested in this one. Look, I mean, to cut to the bottom line, UK Bellway is trading below tangible book value and they do like kind of mid-teens, ROEs through the cycle. those two statements do not belong together. So, you know, please consults financial advisor, not financial advice.

We're going to cross the pond. So that carries all sorts of risks and due diligence, all that. But I think it's a really interesting podcast, and we're going to talk home builders in particular. We're also going to talk about the UK market more broadly. I think you'll learn a lot. We're going to get there in one second. But first, a word from our sponsors. This podcast is sponsored by AlphaSense.

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I'm your host, Andrew Walker. And with me today, I'm happy to have on for the first time, Christian Olson from Olson Value Funds. Christian, how's it going? It's going great things. How you doing? Doing great. really excited to talk about

an idea I followed off and on for the past couple years. But before we get there, quick disclaimer, remind everyone, nothing on this podcast is investing device. Always true, but maybe particularly true today because as you'll hear in a second,

we're talking about an international market, which carries, you know, kind of hiding risk for any of my domestic listeners. And, you know, it's a UK market. So I might say it's a developed market. I kind of think the UK is an emerging market at this point, but neither are here nor there. All right, Christian,

the reason I reached out to you, you wrote up in, I believe it was your Q3 letter, you had to write up on just the UK Home Builders in general. And this is a space that I've been interested in because, again, as I said, the UK is, I think it might be the cheapest market and maybe the most inefficient market of kind of the larger Western Europe view markets on the planet.

So I'm just interested overall and I'm interested specifically in the UK Home Builders. I am rambling. I'll toss it over to you. We're going to discuss the UK Home Building market. I'd love to just start with your overall thesis and then we can dive in from there. Yeah. Thanks for having me on, Andrew. I think you're totally right. The UK market is definitely one of the cheapest stock markets out there. I actually have more than half of Olsen Value Funds portfolio in UK stocks at this point. And we have a big industry exposure to the home builders in the UK. We currently have free positions. My favorite in this sector,

is Belway. And, yeah, I think that the UK home builders are just, I think it's a great setup. I think that's, you know, they're quantitatively cheap. I think that's lots of upsides. Most of these businesses are really good long-term compounders of value, even on a per-share basis. And I think that for a long-term investor,

there's very little downside in some of the UK home builders, especially Bellway. So I think, you know, on a risk return basis, I think it's really especially attractive. And so, you know, we have a big exposure to the sector, and we can really do that because, like I said, I think there's very little downsides if you're a long-term investor. wrong. That's a great way to frame it. I want to dive into a few things there, but let me just start. Well, let me start with my favorite question because I do think it helps frame every conversation. The market is a really competitive place. What are you seeing in the UK home builders in particular that kind of make this a risk-adjusted alpha opportunity?

Yeah, so I think really this opportunity, it's, you know, why does it exist? And, you know, what's the bear case and what do I see in it that others maybe don't? But, you know, I think it's actually a pretty simple setup. I think it's really a cyclical recovery story. I don't think there's really much of like an intelligent bear case for the UK home builders, especially the higher quality ones, if you're a long-term investor. I think, you know, the setup is pretty, you know, sort of stereotypical for a cyclical. You know, we have an industry where demand is volatile and supply adjusts much more slowly than demand.

And unlike from the U.S. where we sit, when interest rates win up around 2022, the demand for new-built housing in the UK dropped very significantly. So I think Bellway's completions are down maybe around about 35% or something like that compared to before the drop in interest rates, I'm saying before the increase in interest rates. Whereas, you know, in the U.S., we've seen a different story. We've seen a much stronger market. So, you know, that's really why the stocks in the industry sold off back around 2022 and why they remain cheap. And I think, you know, maybe you can add to that that, you know, industrial sentiment in the UK has been quite pessimistic for a long time.

and, you know, home builder stocks, you know, they have not really recovered to anywhere near their sort of historical average levels in terms of the multiples they trade at. So I think it's really pretty simple, you know, pretty big drop in demand, pretty fixed supply, and as a result, the market has just sold off. I have some questions and some questions of pushbacks I'm excited to get you but maybe I think the best place to start

might be let's just frame it you mentioned Bellway a few times and I don't think the stats look dramatically different from one to the other so you can give it overall or Bellway specific but maybe we could just frame the I think what attracts you probably rightly is hey you have this

cyclical home builder that's trading on every quantity of metric very cheaply maybe we can just frame the quantitative cheapness of it just to kind of set the stage and I you know Spoiler alert, I listened to a presentation you did on it, and you kind of talked about the value you saw, you know, if it kind of mean reverts over the next.

Maybe we can also use that just to show the upside that people are playing for as well. Yeah, so Beltway, as of today, it traced at 89% of tangible book value. Historically, depending on how far back you go, it's been about like one and a quarter, 1.3 times tangible books. And actually, I think that's too low.

I think the intrinsic value is at least one and a half times tangible book. And it has traded, you know, above one and a half times tangible book in the past. And, you know, they're still making money. The value is compounding. And so the value is growing while you hold it. And in addition, I think you'll see a multiple re-rating over time. and this is this holds true for pretty much all of the UK home builders there are some differences there I would also just add that Bellway and certain of the other publicly created home builders in the UK

and I think that's eight or nine of them left at this point many of them are really excellent long-term compounders of per-share value. Most of them have very good balance sheets. Bellway has almost zero net debt currently, although that will probably go up a little bit because they are starting to buy back shares and be more proactive with their capital allocation. So I think, you know, it's the type of business

where you don't really have a big risk of a permanent loss of capital, even though it's in a very cyclical business. So, you know, I think it'll just compound over the cycle, and it's really just a matter of being patient and waiting for the multiples to re-rates. That was a perfect overview. So let me try to give a few pushbacks. I guess my main pushback, and I'm not even saying these are pushbacks, you know, this is just me, stress test in the case.

It is a UK home builder, right? And it is tied to home building, ultimately, the value of the homes at some point is tied to the economics of the UK. And the UK to my untrained macro eye looks like a kind of disaster. And, you know, I owe everybody says, hey, you know, the best way to get rich in America is to buy a house with an 80% mortgage over the long term. And that's generally true, but, you know, I always show you think about the people who bought houses in Detroit in the 1980s and the city kind of went to heck as all the auto manufacturers went way downhill. I don't think they did that well on their home purchases. And like, I guess my first pushback to you is given the fiscal situation in the UK, you know, I think you've seen a lot of wealthy people fleeing. Is this buying a UK homebuilder like 0.89 times price to book that relies on the book being reliable?

If the book is made up of, in my case, Detroit 1980s land, that book's going to get cut. So I guess my first pushback would be, hey, are we looking at something where the macro headwings kind of overwhelm the general cyclicality and kind of historical quantitative metrics you've talked about? I don't think so. I mean, I think that fundamentally the demand for housing in the UK in the long run is quite solid. think it's underpinned by, you know, population growth and probably a little bit of growth in GDP per capita over time. You're right that currently the UK economy is pretty weak. It's, you know, pretty close to recession. It's, you know, roughly zero growth. And consumer confidence is quite low currently, actually. But I think, you know, a few, I mean, I wouldn't

not compare the UK to Detroit, you know, Detroit saw a massive decline in his population because of the decline in the auto industry. You know, I'm just, I don't disagree, but we have seen, like, a lot of the finance industry left post-Bruns it, and it's not loss of me. Like, one of the ways cities and states go downhill is you keep shooting yourself in the foot. And from an outside review, it seems to me like, you know, the UK has shot itself in the foot for the past 10 years, basically.

Yeah. I mean, I think that's, I think that overstates it, actually. I think you're right that economic growth has been pretty weak in the UK. But I wouldn't call it a disaster by any means. I just don't see that in the numbers. You know, it's an economy that I think will continue to grow, albeit perhaps slowly. You know, if you look at the decline in the demand for new build housing that we've seen in the last three years or so, it's, you know, it, you know, in the long run, I think demand almost has to rebound. You know, we've seen a huge decline in demand. And that's really because, you know, when people see, I would say in large part, it's because when, you know, And people see this big increase in interest rates, whereas, you know, in the UK, you might have bought a home at a, you know, one and a half percent interest rate or something like that. I've gotten a mortgage at a one and a half percent interest rate four years ago. Now it's maybe four and a quarter percent.

At one point, it was higher than that. You know, it's quite a sticker shock. But over time, I think, like I said, the, demand for housing, I think it's pretty price inelastic in the long run because housing is a basic need with no substitutes. And I think people will pay what they have to pay for housing. And I think we've seen that historically, you know, demand for housing, especially new-built housing, is just really cyclical.

You know, you can see that time after time, after time, if you go back decades and look at the historical data. And I think this is just another example of that. You know, just on that cyclical demand and everything, he said, I don't know if there's a bold case or a bear case, but as I said, I have done some work on the UK home builders. And it's funny, if you reach out to the RIR teams, this is just my anecdote. So I'm not suggesting this is 100% verified or true cross score. But in general, when I've talked to them, they've kind of suggested to me like, hey, the domestic, and I mean, domestic is in the UK domestic interest in our stocks is nothing. Most of the outreach is coming from American, you know, we're generally American, but kind of international people who are interested in, in us for all the reasons that you are laying out, right? Like, we are quantitatively cheap. We're at the bottom of the cycle, all that sort of stuff.

I don't know if that's a bull case or a bear case, but I find it interesting when they're like, hey, domestically, people are just, you know, they vomit in their mouth a little bit when they bring us up. But internationally, the value investors are coming for us and we're, you know, the history has been popular with American investors, all of these.

But I find that interesting, not saying there's signal to the noise there, but I just find that interesting. I'll tell us it over to you. I think you're definitely on to something. You know, I think it speaks to how out of favor UK stocks are and UK home builders are in particular. and just also just how little value is left in especially the U.S. stock markets

and maybe also in certain other places around the world and just how cheap the U.K. stock market is. So let me ask this before we go through many different ones. How much of this is just a quantitative bet for you, right? This is, I'm just going to choose Bellwagon, trading up 0.9 times book. And historically, ROEs are in the low to probably closer to the mid-teens, like through the cycle. So when you, something that does mid-teens ROE should probably trade closer to two times than 1.5 times book. And you're saying, hey, I'm getting it for 0.9x. And this is a great quantitative bet.

And by the way, low, low debt, all that sort of versus how much is this is a qualitative bet to you where you kind of more look at the overall UK landscape and say, hey, you know, it is short of housing. All the housing trends that have kind of comes to play in the U.S. over the past 10 years, the U.K. kind of experience in the same things. And you look at, you know, each government is coming in and saying, hey, we're going to, we're going to build new housing. So how would you weigh just like the quantitative versus qualitative there? So I think, you know, it is also very qualitative, but in a different way than what you suggested. And I can talk about that thesis that you mentioned with their sort of chronic under supply of how. housing in the UK, which is absolutely true. I just don't think that's really going to change very much.

But it's qualitative, especially for a company like Bellway, in that if you study its history, going back a few decades actually, and maybe especially how the company performed during the great financial crisis, I think you really see a, a company and a culture that's very conservative and has simply been able to compound per share value very nicely over the very long run. I mean, this is a good long-term compound. It's not like, say, NBR, which is a U.S. home builder that has, you know, a particularly capital light business model and which has done phenomenally well, also in part, because

of its massive stock buybacks. It's not like that, okay? But I think it's a really solid, really solid business. I think also you have to really sort of look under the hood a little bit and look at, you know, what are the risks when you invest in a home builder? And I think I'll touch on two sort of qualitative things as well there. One is about the land market, and the other one is home prices in the UK. So let's take home prices first.

And I think this is actually quite important if you're going to invest in UK home builders, in my opinion. There is quite a divide between London and the UK excluding London. Home prices in London went up a lot after the financial crisis. up until around Brexit in 2016, and then they've remained pretty high, but, you know, relatively steady since then. And London is just really, really expensive. I would worry if I was invested in a home builder that had exposure to London, I would be worried about, you know, potential drop in prices in London. I wouldn't say I'm forecasting that, but I think that's definitely a risk. you know, if you think about the home building business model, you know, it's really like a manufacturing

business where you have very substantial inventory gains or losses because you hold the inventory for so long, especially the land, right? About, you know, the inventory, quote unquote, is really land and work in process, about two thirds of it land, one third work in process. And so if you buy land under the assumption that home prices are going to be, you know, what they were when you bought the land, for example, what you thought they were going to be. But home prices drop, say, 20%. You're going to have massive writedowns and you're going to lose a lot of money. This is the Detroit worry I had, right? You've got the land. You're Detroit in the 80s and then by the 2002s, it's like, well, hey, that land is worth 30% less and inflation's gone up 20%.

So that's a really big right down. Yeah, it's really the key risk if you're invested in homebuilders. And I think maybe especially if you look at how most of the U.S. homebuilders did, I think probably every single one of the publicly traded U.S. homebuilders, you know, NBR was the exception post the financial prices, you know, maybe not all of that, but almost all of them did poorly because, you know, home prices went down a lot and of course also

home starts went down a lot They also had a decent bit of leverage too though if I remember correctly right So like with Bellway which you've mentioned several times The nice thing here is it's basically net debt free So you know Home prices go down 10% and you're net debt free Your book goes if this is 0.9x

You're trading an actual book value after that right down right But if you have 1x turns 1x leverage seems pretty reasonable but then self goes down 10%, boom. You know, that's really how you take the hit. And you might not survive or you might have to raise capital on extremely dilutive terms. But I think just to finish the point about London versus outside of London, if you look at home prices in the UK outside of London,

and maybe you look at price to median income, or you look at the cost of ownership relative to median income and look at that in a long-term historical context, they're actually very reasonable outside of London. In London, they're pretty expensive. And so Bellway, for example, I think has maybe less than 5%. They're 2 to 4% of its total completions today are in London, and that's also true for some of the other publicly traded home builders over there. And I think that's really important if you're going to invest in a UK homebuilder. I think it really reduces the tail risk significantly. The other point, sort of qualitative point that I'll make about the industry is the land market. So,

The land market is very different today than it was just before the global financial crisis. Bellway was actually kind of an exception, but most of the UK home builders did very poorly in the financial crisis, maybe almost as poorly as the U.S. ones. And a big part of that was because they were buying land in the mid-2000s up to about 2007. at prices that assumed that, you know, they were going to sell the homes at, you know, much higher prices than they ended up doing. Land prices dropped roughly 50% in the UK, residential development land prices dropped about 50% in the financial crisis. In nominal terms, they have recovered to about where they were at their peak in 2007, maybe even slightly below, but if you're just for inflation, there's still probably at least 40% below the peak in 2007. The reason is that today you have a much more rational industry.

You have fewer bidders for any given piece of land, partly because there's been consolidation in the industry, partly because there are just fewer people that want to be home builders today than there were in the mid-2000s when the housing market was hot. And if you look at all of the publicly traded home builders in the UK, you know, how they acted historically, you can see that they're run very differently today than they were before the GFC. And so they've actually gotten better and much more conservatively, And today, I think they all use very similar models for valuing land and have very similar hurdle rates that they use to value land. So they don't tend to get into the kinds of bidding wars that they did in the mid-2000s.

So I think it's a very different situation today than it was then. And as a result, I don't really see the same kind of downsides. that we did. And, you know, so it's really a matter of, you know, what's the downside to home prices and what's the risk that home builders have overpaid for land. And I think there we're in pretty good shape,

especially if we're outside of London. That's perfect. We've mentioned Bellway a few times, and I think at the start you said, hey, you're long three of them, and you don't need to give the specific ones or whatever you can. But let's just start.

Could you give me Bellway and compare them to one or two others and just, look, when I see homebuilders, I kind of think, oh, it's a home builder. But if there's any differences in strategy or anything else that people should kind of be thinking about and kind of, again, you've mentioned Bellway several times, what you like specifically about Bellway maybe a little bit more than others. I'd just love to give people kind of a lay of the land, if that makes sense. Yeah, so Bellway is a pretty boring homebuilder. It's like a real cookie cutter, home builder. They build single family homes throughout the U.K. They have a little bit of an overweighting in the northern part of the country, which is where the business originated after World War II.

Bellway has always been quite conservatively managed and probably been one of the best managed. It really stood out in the GFC for having really good results. their return on equity was minus 4% in the fiscal year ending July 2009, which was, you know, I think the second best in the industry. You know, another home builder I like is Persimmon. Persimmon has a little bit different business model. So Bellway built sort of.

you know, middle of the roads, homes, maybe a slightly below average price point. Persimmon builds significantly below average price point homes. They have a model that's very financially strong and historically they've really generated some of the best shareholder returns in the industry. If you look at return on equity or return on capital on an unleverage basis, They have a little bit different model. They buy land in a little bit less desirable areas. They have a lot less competition for the land,

and they save quite a lot of money that way. They build on smaller plots as well. And so the land costs are like 11, 12% of revenues, whereas for more typical home builders like Bellway, it's closer to 20%. And so as a result, Persimmon has had excellent margins and return on capital

historically. They also trade at, I would say, around one and a quarter times tangible book. But it's, I would say, it's deserved. It's just, you know, it's actually, I think it's

probably trades at the highest multiple of tangible book among the publicly traded home. is in the UK, but it's also probably the best or second best one in the industry. So I think that's also a really interesting business to own at the right price. But there's a variety of business models there in the industry. A lot of them are more like Bellway, this sort of cookie cutter,

geographically diversified companies, generally trading at similar multiples to Bellway that's roughly 90% of tangible book value. But I think Bellway just has a little bit of a qualitative edge because historically it's just been a little bit better managed than average, especially if you look at how they did in the GFC, But I will say that the rest of the industry has gotten much better run and much more conservatively run than they were before the GFC.

Let me ask on, let me switch a little bit to management incentives. And again, I listened to you, pitch this idea. And you mentioned the CEO at Bellway is a Bellway man. He's been a company man for probably been there 25 years, if I had to guess, right? It rose to the ranks, he's the CEO. That's great. but, you know, I worry with all, and this is not just with UK home builders, I worry with all UK companies. Again, I've spent a lot of time looking. The governance there is, I'm just going to say

sleepier than the U.S., right? Like, you'll see a lot of these companies, buybacks are not in bogue. Management incentives are much less aggressive, and people hear aggressive and they think, oh, that's a good thing. And I actually mean it in a bad way where they don't get paid on shareholder a return, right? They're really just kind of paid on bonuses, and they kind of, insider ownership across the board, director ownership, it's low. They kind of don't care about the stock price. And when I talked a lot of the board, I get the sense they don't really care. Yeah, they'd like it to be higher than not, but they just don't super care. And I wrapped that all into one overarching where we can talk about always specific or we talk overall, but I kind of look at these and say,

man, a home builder with no net debt, that's nice for the downside protection. But that is, Like, no net debt is really inefficient. And, you know, I worry that you promote a company man who's been there for 25 years. You've prone them through the ranks. I'm sure he's very good at building homes. But I worry, like the job of the CEO ultimately capital allocation. And I kind of worry that, hey, this just sits here and they pile cash on the balance sheet and they run a sleepier business model.

And maybe Christians, right. But, you know, the ROE, instead of being 14%, it's 10%, and you buy it at 90% book value. you probably do okay, but we're not talking like screaming risk adjusted alpha. I know they recently announced a buyback, I'll let you talk about that. But I just want to throw out the kind of, hey, these guys, for the past couple years, the stock price of the doldrums, I'm not seeing lots of opportunities to like kind of pull the lever and create their own destiny. So throw it all of that over to you. Yeah.

So I think, you know, I would certainly prefer to see, you know, a more shareholder, a line, compensation structure. But I don't think that it's a sign of a management team that's not shareholder friendly because it's really a cultural thing, right? In the UK, it's just customary to have these less aggressive compensation plans than it is in the U.S.

So I wouldn't, you know, read too much into it. That being said, I will say I think it is changing. And it's not like it's terrible. I mean, Bellways management does have equity incentives and they do have equity ownership, but it's not at the level you would love to see. And especially coming from a U.S. background, you know, it looks, you know, not great. Right. So I would say, yeah, it would be better if it was more shareholder aligned. But, you know, if you look at, you know, what the company is actually doing and how they've done historically for shareholders, I think it actually looks pretty good.

So Bellway, they recently announced sort of a new capital allocation framework. They have bought back stock a couple of times in the last few years. That's, I think, is that's sort of a sign of a change in how companies in the UK approach capital allocation. And they just announced another stock buyback program recently. And I think that as the market presumably recovers over the coming years, I think that they will do even more by-backs. I think this is probably a change that's likely to stick for the long term. They're also more focused on utilizing the balance sheet better.

So their net debt to total capital, and if you include in the debt, land payables, which you'll find in accounts payable, it's roughly 5% today. And they're going to bring that up to about 15 to 20 percent, I believe. So the balance sheet is going to be a bit more efficient, and that will be accretive to shareholders. And I think it's a good catalyst for the stock potentially as well. And I think still at that level of leverage, I still think that the balance sheet is strong enough to withstand a really severe downturn. And you want that as a shareholder, right? You don't want to suffer a large permanent loss of capital

because, you know, there's some sort of unexpected massive downturn of depression or another pandemic, who knows what, major real estate. Pandemic might be good for them, man. And people might be moving out of London into the sun, to the, you know, outside. It might be great for them. Yeah. Yeah, I mean, you never know, but, you know, there are always tail risks, and, you know, having a strong balance sheet, you know, is what prevents those, you know, unexpected situations from turning into a permanent loss of capital for shareholders due to dilutive equity offerings or bankruptcy, you know, at 15, 20 percent net debt to total capital, which I think is pretty similar to what Bellway had.

right before the GFC is, you know, should still be fine. It's interesting about the home building business model that in a downturn, you actually generate a lot of positive cash flow because you're not buying much land and you're not building as much. So you are quote-unquote inventory, which is land. and work and process and the road sewers things like that you know that and that frees up cash and so uh and and that also helps so i think that belway will still be fine i'll still be you know it's still going to be asleep well at night investment, even with that level of leverage.

And the last thing about their new capital allocation framework, I'll mention, is that they're going to be more focused on just asset turnover. So I think that, you know, first of all, it is actually changing in a tangible way now at Bellway. And I think it's, you know, it may have a little bit to do with their new CFO. I don't know. It's probably also just a, you know, sort of general trend among UK publicly traded companies a little bit. I wouldn't want to overstate that. And maybe also just the fact that they're sensitive to, you know, shareholder value and not least given the fact, but we're in a downturn, right?

And shareholders want to see a return on their investment. So, you know, I commend them for doing that. And again, the fact that the shareholder incentives are not like they are for a lot of U.S. companies, it's a cultural thing. And I would not read too much into it. I think you're, you hit the nail on the head. It is a cultural thing. But as it keeps like, look, we said at the start, right? I said, hey, more American investors are interested in the UK home builders than UK investors.

And guess what happens? When you start getting a roster full of American investors, yeah, culturally you might not be able to, but the American investors vote. And as you get more American investors, they're going to start demanding a little bit more. And I've had friends who do a lot more in the UK than I do. And they tell me, look, culturally, it's slow, it takes time, but you are starting to see it right at Bellway. 150 million, if I remember correctly, share repurchase plan that will get executed over the next year. That's 5% of market cap. It's not huge, but it's also not nothing.

And I think you're going to keep seeing the push for that. And you are seeing across the board at the UK, more share buybacks. And it starts slow, but it keeps building on each other. So I do think there's a little bit there. I kind of rambled on that incentive. Anything else you want to say on the incentives or anything? No, nothing to write on that. Let me just say one last question.

And maybe we can touch on some other stuff. But, you know, I do want to ask, I've alluded to several times. There's a ton of cheap stuff over in the UK, right? And I think somebody who listens to this podcast might say, okay, Andrew and Christian both agreed that there's a ton of cheap stuff in the UK. Fiscal picture might be a little bleak, whatever. Why not go find stuff in the UK that has a lot of international exposure from the UK and kind of gets thrown out with that bathwater? I'm not going to, no names are like jumping off the top of my head, but there are plenty of stocks in the UK that have some UK present. that have a lot of international presence, you know,

in the same way that the U.S. has Apple, which, yeah, it has a heck of a U.S. present, but it's got a heck a lot of worldwide presence to, you know. So I think people might say, hey, if you're kind of looking at this as a, the U.K. is cheap play, and we're comping Apple's Orange. Like, there's other stuff that trades below book value in the U.K.

That's got a lot of international exposure. Well, why do you want, like, that home builder risk versus just kind of going elsewhere? I realize it's a hard question to answer, but I'd love to put that to you. Yeah. I think in principle, you're absolutely right. I don't really have anything along those lines. I tend to focus a little bit more on the small caps. I think small caps in particular in the UK have been really attractive, really cheap for a while and still are. So that's where I found the most value. I think in principle, It's totally logical. And I think there probably are some opportunities like that.

Yeah. No, I've just been fascinated by the UK marketing. You know what I love about the UK market more than anything? I love that the companies have to file the four and fours every day and tell you if they're buying back shares. Like every day I wake up and I'm like, oh, these six companies, another day, another buyback, you know? Yeah, yeah. So I get those every single morning, yeah. We hit on the UK.

I'd love to just, we've got about five minutes left. I'd love to just bounce the rent. So we're getting on the UK Home Builders. What else in the UK are you interested in right now? You know, the other things I own in the UK are fairly idiosyncratic. I do own some distributors in the UK, but they're sort of in different businesses. I think a lot of things in the UK that have some sort of housing, Exposure or maybe particularly cheap.

We own a distributor of mostly wood panels. It's called James Latham. It's like a really boring illiquid microcaps, super high quality, not quite as cheap as Bellway, but super safe, high quality, probably around 10, right around 10 times earnings. So I think if I was going to look for cheap stocks in the UK, I would be looking for things that are sort of housing related in some way

or that are, you know, where the demand is impacted by the really low consumer confidence that we have in the UK right now. I mean, the economy is weak, but consumer confidence is really low. in the UK, and obviously that's affected stocks like James Latham, you know, because wood panels are seen as, you know, housing-related as they are. It's more for the repair maintenance and improvement market than the new-built markets, in this case. But, you know, that's where I would look.

But in the UK, I think the themes are. You know, there's really just home builders are cheap. Anything that's, you know, exposed to consumer confidence, small caps. I think there are a lot of really good ones. But outside of that, for me, it's pretty idiosyncratic. Makes total sense. No, just I know I've had multiple friends, Travis Perkins and a few other distributors. They've talked about a lot.

And as you said, anything in the UK, Wicks, the kind of do it yourself, the home improvement. I've looked at that a few times and that looks very cheap, but, you know, it's a retailer and it's got the home improvement play. But yeah, anything that touches the consumer, it's just crazy. And I just, these four and fours, you look at them, you're like, hey, man, if these stocks don't go up, these guys aren't even like pushing it to the max and the buybacks. But if these, if these stocks don't go up, you're going to get 10% of the stock bought back every year plus dividends and more free cash on top unless the whole thing goes into a depression. It's kind of hard to see how you get. And look,

Also, the UK government, I mean, you probably know more about it than me, but it seems like they realize they're in a tough spot because they are starting to talk about, hey, the stamp taxes and everything. We need to repeal those. We need to be a better place for international capital, for domestic capital, all that sort of stuff. So it seems like you've got a lot, the valuations there. You've got a lot of the tailwinds, but yeah. Yeah. And you mentioned the new UK labor government, which has been there for about a year and a half now. I would say even though they're viewed as being, you know, a little bit business unfriendly, for the home builders, I would say that they've probably been a net positive because they have improved the planning, the process for getting planning permission for housing developments.

And that actually is a little bit of a tailwind for the homebuilders. even the business unfriendly parties I think are increasingly starting to realize I mean you've gotten here in America the housing situation is at a breaking point and you see if they don't get a handle on it and they don't start approving like the one way to solve housing

it's very simple build more housing if they don't get a handle on that they're going to get voted out so even the business unfriendly ones I think are giving that last question there that is always an interesting one right Like, I think in the late 2010s, the homebuilders, and I'm thinking domestic, not in national, the home builders did well, in part because the housing building permits were so restrictive

that, you know, prices were really running and then you really saw it after COVID, right? But they benefited from the restriction, and it kind of reminds me of oil, right? Like all these oil execs want to drill, baby drill, and they want permits everywhere. It's kind of like, be careful what you wish for. So I'd love to end with that question to you. on the UK. Let's if you get more supportive policies that allow for more home building, is that a bull case or a bear case for these guys?

I think it is a net positive for them because they will be able to really turn over their land banks faster and their volumes will go up. I think it'll be a plus for the intrinsic value and maybe even more so for the stock crisis. You're right, though, that, you know, the constrained supply. in the UK, which is mostly because of the very difficult environment for getting planning permission for new developments, that's a real underpin, you know, for their asset values. And so, you know, Belway trades at 89% of tangible book value. And that's, you know, that's, you know, inherently valuable lands and work in progress.

I think, you know, just about, you know, almost, you know, every plot they own, you know, someday they or somebody probably themselves will build something on there and make money on it. Land is just inherently valuable, especially if it's bought reasonably intelligently. So on the one hand, you know, the constrained land supply, it really underpins the acid value. On the other hand, I do think it would be a net positive for them, especially for the stock price, if the volumes really started going up. And I think the volumes would start going up, although that really also depends on demand.

And like I said before, I think it's just a matter of time before demand normalizes. or the government comes out with a demand stimulus program. This is something we didn't touch on. I think it's potential positive catalyst for the sector. We have not had a demand stimulus program for a new-built housing in the UK for a couple of years now. That's actually quite unusual, and there's some speculation that the government would create one. point here in the next year or two, perhaps. Perfect.

But Christian, I think we did a nice job walking through. I mean, look, home building, it's a UK home building. It's a big sector, but it's not a crazy complex sector. I think we did a nice job walking through risk for wars, opportunity. Obviously, Bellway was focused, but I always want to turn over you. Anything you think we should, we just skipped over or anything you think we kind of glossed over, we should hit harder? I think we covered the important stuff.

I would just say sort of in summary that, you know, I think the upside is quite meaningful. You know, I think, you know, Belway, I could easily see it trading at one and a half times book value. And that book value is increasing even now with depressed demand. So going from, you know, 89% of book to, you know, maybe one and a half times book over the next couple years or the next few years. With the compounding on top of that, I think the upside is actually pretty nice. And also, I would really stress this. I think for a long-term investor, I think the downside is quite small. You know, this is a sleep well at night investment for me.

And so on a risk-adjusted basis, I think it's really one of my favorite investments. Fantastic. Well, look, that's why I wanted to have you on. I'd love to have smart people come on to talk about their favorite investments. So Christian Olson from Olsa Value Funds, this has been great. We'll have to have you on for a second podcast in your future, but appreciate you coming on to walk us through Home Building Across the Pond, and we'll talk to soon. Thanks for having me. A quick disclaimer, nothing on this podcast should be considered investment advice.

Guests or the hosts may have positions in any of the stocks mentioned during this podcast. Please do your own work and consult a financial advisor. Thanks.