Barratt shares jump 24% as Polaris lifts its stake

Barratt enjoyed a 24% surge in its share price yesterday – increasing its value by £400m – as a result of a relatively minor punt of just £2m by Polaris, a little-known American fund management group.

Polaris Capital Management is based in Boston. It already held a 5.7% stake in Barratt but news leaked out yesterday that its value fund manager had thought the time was ripe to lift that figure by 0.5% to 6.2%.

All housebuilders basked in the sunshine. Their share prices all went up the ladder as a result of the implication for the whole sector and a summary of yesterday’s rises shows:

• 24% - Barratt
• 11% - Persimmon
• 8% - Bovis Homes
• 7% - Bellway

Overall, the housebuilding sector was up by 11%.

When the name of Polaris first showed up on Barratt’s shareholder register a month ago, shares traded at 60p – well below the latest figure of 159p.

Polaris was rumoured at that time to have approached the Barratt management team about a potential rescue deal.

Today’s Financial Times suggests that that possibility has faded. “Recent comments from Polaris managers suggest its interest is now financial rather than strategic,” it says.

The FT adds that the latest insight coming from Polaris is that its investment approach is to identify and buy into companies “with undervalued streams of sustainable cash flow”.

Today’s Daily Mail reports: “Polaris isn’t considering a bid for Barratt, but its interest sparked hopes that share prices in the sector may be ready to bounce.”

Polaris isn’t the only one who is anticipating that the moment of upturn is close.

Phoenix Asset Management, another fund that looks for long-term value, has already amassed an 11% stake in Barratt and the housebuilder’s share register lists the names of five other large institutional investors - the rules of the game are that once you have taken/built up a stake of 3% in any quoted company you must put your name into the open.

Barratt’s shares traded at close on £13 last year.