Retirement saving: why I’d buy these 2 FTSE 100 shares in an ISA or SIPP today

I think these two FTSE 100 (INDEXFTSE:UKX) shares could deliver improving outlooks after contrasting recent performances.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Since the FTSE 100 is made up of a wide range of companies that operate in a variety of sectors, its performance does not paint the full picture for its members.

As such, some FTSE 100 stocks have surged higher in recent months. By contrast, others have become increasingly unpopular among investors.

Here are two large-cap shares that have contrasting recent performances. While the reasons for buying them may be very different, both companies could deliver improving returns that help you to build a nest egg for retirement.

Smith & Nephew

Medical devices company Smith & Nephew (LSE: SN) has enjoyed a high level of growth over the last year. Its share price has gained over 40% at a time when the prospects for the FTSE 100 have become increasingly uncertain.

Looking ahead, the company may offer further capital growth potential. Its relatively low correlation with the wider economy may mean that it is less impacted by the prospect of a slowdown in the global GDP growth rate. This may lead to improving investor sentiment, with increasingly risk-averse investors likely to pivot towards companies that offer defensive credentials.

Smith & Nephew also offers long-term earnings growth potential. Demand for its products is likely to increase due to demographic changes, with an ageing world population that is also increasing in size potentially leading to rising sales.

Following its recent share price rise, the company trades on a price-to-earnings (P/E) ratio of around 25. This may suggest that it is overvalued. However, with its defensive characteristics and its upbeat financial growth prospects, it could continue to outperform the FTSE 100 over the long run.

BT

Unlike Smith & Nephew, BT (LSE: BT.A) has experienced a hugely challenging period in recent months. The company’s shares have declined by around 27%, with the business reporting a disappointing financial performance in its recent update.

For example, revenue and profit both declined in the first quarter of its current financial year. For the full year, BT is forecast to post a decline in net profit of 2%.

Although its near-term prospects may be somewhat downbeat, the company’s investment in improving the customer experience appears to be paying off. Its fixed line churn declined to 1.3% in the first quarter of the current year, while it has recorded 12 successive quarters of improving net promoter scores.

An improving customer experience could help to differentiate the business in what remains a highly competitive quad-play market. The investment being made by the business may also strengthen its long-term financial outlook, and could prompt a recovery.

Trading on a P/E ratio of just 6.2, BT appears to offer a wide margin of safety. Therefore, it could prove to be an appealing value investing opportunity that posts a recovery over the coming years.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »