While spread betting and forex trading may offer the potential for near-term gains, they also carry a significant amount of risk. Their volatility and unpredictability, as well as leverage, could cause losses for investors. As such, buying undervalued FTSE 100 shares and holding them for the long term could be a better strategy.
With that in mind, here are two large-cap shares that seem to be undervalued at the present time. They are forecast to post strong earnings growth in the current year that may improve your prospects of making a million in the long run.
Polymetal
The rising gold price has had a positive impact on the prospects for precious metals mining company Polymetal (LSE: POLY). Its shares have risen by 43% in the past year as investors have become increasingly bullish about the outlook for the wider sector.
Looking ahead, the company is forecast to post a rise in its bottom line of 32% in the current year. Despite this, it trades on a price-to-earnings growth (PEG) ratio of just 0.4. This suggests that it could offer a wide margin of safety, and there may be further capital growth ahead for its investors.
The gold price could realistically move higher. Geopolitical risks in the Middle East have been heightened in recent weeks, while the global trade war may mean that investors focus on defensive assets.
With US interest rates unlikely to move higher at a rapid pace, now could be the right time to buy a slice of Polymetal. Although it could be a risky stock to own due to its dependence on the gold price, its low valuation suggests that its risk/reward ratio is favourable for long-term investors.
British American Tobacco
The recent trading update from British American Tobacco (LSE: BATS) highlighted the progress it is making at what is an uncertain period for the tobacco market. It is delivering good growth in new categories, such as e-cigarettes, despite regulatory changes in the US. They have caused investors to become cautious about the wider industry, but British American Tobacco believes that they could produce a stronger regulatory environment in which it is well placed to succeed.
Additionally, the company is making progress in deleveraging. This will help to reduce its overall risks, and could improve its financial performance. It is also making market share gains in combustibles and in new categories that may produce a more resilient profit performance in the coming years.
In the current year, British American Tobacco is forecast to post a rise in net profit of 6%. Its price-to-earnings (P/E) ratio of 10.3 suggests that it offers good value for money, while a dividend yield of 6.4% highlights its income investing potential. As such, now could be a good time to buy it for the long term.
