£5k to invest today? I’d buy these 2 bargain FTSE 100 stocks in an ISA

These two FTSE 100 (INDEXFTSE:UKX) stocks could offer long-term growth potential, in my opinion, after their recent declines.

| 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.

The FTSE 100 has gained over 25% since its market crash in February/March. Despite this, a number of its members appear to offer good value for money at the present time. This could present a buying opportunity for long-term investors who are able to look beyond the short-term risks facing the index.

With that in mind, here are two FTSE 100 shares that could be worth buying in a Stocks and Shares ISA today with £5k, or any other amount. They could improve your financial position over the coming years.

FTSE 100 bank RBS

The first quarter trading update released by RBS (LSE: RBS) last month highlighted the challenging outlook facing the FTSE 100 banking sector. The company was expecting a 25 basis point reduction in interest rates in 2020, but coronavirus has caused a 65-point reduction. This will adversely impact the bank’s earnings prospects, according to its update.

Furthermore, a challenging economic outlook may mean demand for many of its products and services will decline. It could also experience a higher proportion of defaults and late payments that negatively impact on its financial performance.

Despite this, RBS could offer long-term recovery potential relative to the wider FTSE 100. It has been able to improve its financial strength over the last few years, and plans to reduce costs as the economic outlook improves.

Investor sentiment has weakened of late, which could mean it now offers a wide margin of safety. Since the start of the 2020 calendar year, the RBS share price has fallen by around 47%. It’s also shown little sign of mounting a successful recovery. As such, it may experience further challenges in the short run. But, over the long run, it could prove to be a FTSE 100 recovery opportunity that delivers improving performance as the economic outlook returns to normal.

RSA

Another FTSE 100 share that’s experienced a significant decline in its market valuation this year is RSA (LSE: RSA). The insurance company’s stock price is currently down by around 23% in 2020. This suggests investors have factored in many of the risks it faces as a result of an opaque economic outlook.

The FTSE 100 company’s recent trading update showed it’s still too early to determine the size of insurance claims relating to coronavirus. However, claims in segments such as travel insurance are likely to be significant and could impact negatively on the company’s near-term financial outlook.

Despite this, RSA appears to be in a solid financial position to overcome the short-term challenges it faces from a weak economic outlook. For example, its Solvency II coverage ratio of around 151% falls within its target range of 130-160%.

Therefore, it could offer an improving financial performance over the long run. And that could make now the right time to buy a slice of ithe business within a diversified portfolio of FTSE 100 shares.

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

Investing Articles

My ISA is ready for a 30% penny stock crash on 30 October!

Investors in AIM-listed small-cap and penny stocks could be in for a fright later this month when the budget is…

Read more »

Road trip. Father and son travelling together by car
Investing Articles

Where will the Tesla share price go next? Here’s what the experts say

The Tesla share price has been going pretty much sideways since 2021, and its robotaxi event hasn't had much of…

Read more »

British Pennies on a Pound Note
Investing Articles

Can this 8%+ yielding penny share maintain its dividend?

Our writer holds this penny share and likes its yield of over 8%. But recent business performance has made him…

Read more »

Dividend Shares

How I could make a 10% yield via dividend shares for a juicy second income

Jon Smith explains how he could build a diversified portfolio of stocks with an exceptionally high yield for his second…

Read more »

Passive and Active: text from letters of the wooden alphabet on a green chalk board
Top Stocks

5 top ETFs Fools own in their Stocks and Shares ISAs

Do you own any ETFs in your Stocks and Shares ISA? Here, five Fools reveal why they have positions in…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

Is it madness to buy the S&P 500 now?

The S&P 500 has been on a tear for many years. But a (very) frothy valuation leaves our Foolish writer…

Read more »

Two white male workmen working on site at an oil rig
Investing Articles

The Shell share price could rocket past 3,000p, analysts claim, if oil heads for $300

In today's uncertain times the Shell share price could go anywhere, in any direction, says Harvey Jones. But he still…

Read more »

Investing Articles

What’s going on with the easyJet share price?

Harvey Jones is impressed by the strong recovery in the easyJet share price over the last couple of years. Now…

Read more »