I prefer to invest in companies with low p/e ratios in relation to their earnings per share growth rates. The housebuilders attract me because they have low p/e ratios due to investors fearing that there might be another housing crash and worries about Labour’s plans to cap rents and prevent the hoarding of land.

^{Bovis Homes’ earnings will grow by 550pc over five years if forecasts are met}

However, after the election, whatever the shape of our new government, there will still be a shortage of houses that is likely to last for many years to come. Jefferies, a respected broker, came out on April 10 with an excellent 61‑page circular on British housebuilders. The broker was very bullish about their prospects, making the point that this year had started better than expected, that their investment fundamentals were excellent and that their growth records since 2011 were far better than most.

Jefferies recommended a select number of companies including Bovis Homes and Bellway with price targets more than 30pc above today’s prices.

I have a holding in Bellway and have been building a more substantial one in Bovis, which is especially attractive to me because 75pc of its properties are in the south of England – the highest concentration among national housebuilders.

Telford Homes, which I recommended in March, attracted me for similar reasons. Telford is focused on London, including properties that should benefit from Crossrail. A recent trading update made it clear that Telford’s properties were still selling well with higher than usual margins, while profits for the year ended March 31 were anticipated to be above market expectations and 93pc of next year’s unbuilt stock had already been sold off-plan. The shares remain attractive at 435p, with a prospective growth rate for the year ahead of well over 25pc and a p/e ratio of less than 11.

Now for the Bovis fundamentals. First let us look at its stellar earnings per share record since 2011 and the 2015 and 2016 forecasts (see table below).

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Earnings per share have risen substantially each year, resulting in total growth (including forecasts) of about 550pc – and bear in mind that dividends totalling 124p will also have been paid by 2016.

I recommend Bovis shares at 930p. The prospective p/e ratio is a very attractive 8.7, the estimated growth rate for the year ahead is 26pc, the balance sheet is strong and the dividend yield is an appealing 4.3pc. Jefferies’ target price is £12.47.

Now let us contrast the record of Bovis with that of Asos. The earnings per share of Asos have risen in a choppy way from 30p in 2011 to an anticipated 54p in 2016, producing total growth of 80pc. Quite good but pale in comparison with 550pc from Bovis, and Asos pays no dividends.

I know that Asos has an excellent website and strong international prospects but there have already been setbacks, which might recur. For example, a Bank of America circular mentions, under the usual warning about key risks, that Asos has a higher “fashion risk” than some of its peers and that there could be an increase in competition. If things go awry, the shares of a company on a 2016 p/e ratio of 70 would be very vulnerable.

In any event, as a fast-growing company matures and becomes much larger its earnings per share growth rate and p/e ratio will tend to revert to the mean. There will therefore be eventual erosion of the p/e ratio and as it falls to a more normal level it will carry the shares down with it. Very ugly if you start on a 2016 p/e ratio of 70.

Many investors will think that it is inappropriate and perhaps unfair to compare a growth company such as Asos with a housebuilder such as Bovis. They might argue that the companies are very different animals and not really comparable. I would reply that they have one very important factor in common – they both have quoted shares in which you might be considering whether or not to invest your money.

Whatever a company’s line of business, investment comes down to the p/e ratio you pay on entry and the future financial results – how strong is the balance sheet and cash generation, what has been the growth rate, what is it likely to be in future and are you paying a premium for the shares or getting them at a discount? Needless to say, I recommend a discount.

Jim Slater’s story

Before Jim Slater became famous as a buccaneering financier he was a company executive.

After an illness that he feared might end his career and force him to find another source of income, he decided to learn about the stock market.

He researched the subject exhaustively before he devised a system of investment and bought his first few shares.

He then put his system to the test in a share-tipping column in The Sunday Telegraph titled “Capitalist”, which began in 1963. In two years his tips rose by 68.9pc against just 3.6pc for the wider market.