SO many building companies have raised cash to buy up housing land

lately that there must be a danger that plot values will escalate to a

level not justified by the likely level of house prices.

Now the second-largest housebuilder -- and the biggest in Scotland --

George Wimpey has decided it is now or never if it wants to secure its

future sites at reasonable prices.

It is raising #104m from shareholders through an underwritten

one-for-four rights issue at 148p.

Chief executive Joe Dwyer reckons current land prices will no longer

be obtainable even in six months time. With the contraction in the

building industry, not to mention the firms that have gone out of

business, there is certainly land to be had, but Wimpey's buying team

clearly has to get its skates on.

Wimpey is looking for more land in all areas and wants to maintain a

landbank equivalent to 2[1/2] years' output. It now has around 15,000,

which was actually almost three times the 1992 build rate of 5500.

But this was exceptionally depressed -- at the peak the group put up

getting on for 10,000 -- and 1993 production will be higher, with

analysts projecting 6500-7000. The land bought now will be sold as

houses over the next 2[1/2] years.

The housing operation has been streamlined and is now capable of much

higher sales without a corresponding increase in fixed costs. The

eventual target is to achieve sales of double the capital employed in

the business of #400m. Last year's sales were only #469m, so the goal is

a long-term one.

Wimpey Homes has seen a 55% rise to 4106 in UK housing sales in the

first five months of the year compared with the depressed level of a

year earlier. With prices stabilising and lower incentives required to

shift houses, the group is convinced that a sustainable though gradual

recovery in the market is under way.

Wimpey's strategy since Mr Dwyer came in two years ago of

concentrating on the core activities of housebuilding, construction and

minerals still has some way to go. The disposals, so far, have brought

in #300m, but there is still some #100m to #200m to come through further

withdrawal from property. The rights cash will buy time to make these

disposals at better prices, for example, when the developments are

tenanted.

Gearing was down to a comfortable 30% at the end of 1992, but debt has

since risen by 17%, reflecting seasonal demand for working capital.

The group also intends to put some cash into minerals, mainly to

modernise plant in the UK in order to lower unit costs. The group has

various quarrying interests in the Highlands and central belt of

Scotland. More investment will also be made in the US quarries.

Apart from housing, construction has also picked up, with orders 35%

ahead in the first five months of 1993. But Wimpey is not shouting about

this as conditions remain highly competitive and it does not see

recovery until at least 1995. Overseas trading remains generally

difficult, though there are some signs of better demand for aggregates

in the US.

Wimpey shares lost just 3p to 184p on the rights statement and their

recent outperformance looks set to continue for a while yet.

Smaller is

beautiful

SMALLER companies have dramatically outperformed the overall market

this year, with a 21.7% rise in the Hoare Govett smaller companies index

(excluding investment trusts) comparing with a gain of just 5% for the

All-Share.

Large companies were hit badly enough by the recession but at least

most of them have extensive export business and overseas operations

which offset some of the sharp downturn in the UK. Also, they often have

commanding market share positions which also help. Smaller companies

usually have none of this protection and have been hit commensurately

badly.

Now, however, the boot is on the other foot. Smaller companies are

more dependent on the UK economy, so those that have survived the

recession have more recovery potential as the economy recovers. Major

companies will, as a rule, have a smaller exposure to this, except those

in certain sectors, such as retailing which is largely UK orientated.

A number of smaller company funds have already been launched to catch

the trend and now two more join their ranks. Hoare Govett itself is

offering 40 million shares at #1 time in an investment trust which will

be a clone of the smaller companies trust it launched last December,

investing in over 200 stocks which are included in its index.

A more stock-picking approach will be taken by fund manager Peter Webb

of CW Asset Management, who has a strong track record as a smaller

companies specialist. He will run Eaglet Investment Trust, for which

stockbroker Greig Middleton is seeking buyers for 30 million shares. He

will aim to have 60 stocks with an average capitalisation of #20m, which

really is at the small end.

Despite the sector's strong showing this year, it still has a lot of

ground to make up, given the 43% underperformance in the four years to

the end of 1992. Over the long term, there is no doubting its superior

performance. Between 1955 and 1992 the Hoare index has shown a 18%

annual return, including reinvested income, against 14% for the market

as a whole.

Individual shares carry more risk than those of larger companies, so

it is important to have the protection of a portfolio spread across a

large number of shares.