After the crash: What happened to contractor stocks in July

Construction companies began the current year with significant gains, but during the war with Iran, they returned to a downward trend. The situation in March clearly demonstrated that the war led to industry uncertainty. Investors favor certainty, and when projects are delayed, companies face significant difficulties.

As the war dragged on, the situation for construction companies worsened. In recent months, interest rates have been falling, which is typically a positive sign for developers. However, despite expectations for growth, construction stocks have taken blow after blow, falling by 5% in July.

Previous months also reflected this trend. The beginning of June was marked by uncertainty regarding a potential deal between the USA and Iran, and even after it was signed, sharp price declines were recorded. Earlier, in May, the construction index fell by 8.5%. Although real estate companies saw a slight recovery in apartment sales in May and June, June remained a difficult month for public construction companies, with investors continuing to sell off their holdings.

Stocks related to the real estate sector are generally divided into two categories:

1. The construction index: includes contracting and development companies specializing in actual construction (residential, infrastructure, and project development).

2. The real estate index: includes income-producing real estate companies (such as REIT funds, asset management, and rental companies) and development firms.

The difference between a contractor and a developer lies in the responsibility for execution versus initiation. For example, the contractor Danya Cebus performs construction work for the developer Gindi Holdings (private) in Sde Dov. Some developers also act as contractors, which helps the company manage construction costs.

Among the 6 largest stocks in the construction and real estate index, Shikun & Binui stands out as it belongs to both categories. The construction index features more development companies, some of which specialize in urban renewal. Two months ago, Rimon (market value: 5.9 billion shekels) entered the top 6, replacing Danya Cebus (market value: 3.86 billion shekels).

July performance for major construction stocks:

• Rimon recorded a 13.3% increase, leading the gains.

• Azorim and Ashtrom recorded minimal growth.

• Shikun & Binui fell by 7.9%.

• Israel Canada fell by 11%.

• Aura, the largest urban renewal company in Israel, recorded the largest decline.

What is expected next? Construction and real estate stocks are waiting for another interest rate cut, which could boost sales momentum. However, a major question remains in the background: will Donald Trump change his mind and decide to attack Iran?