Buying UK shares in a Stocks and Shares ISA could be a profitable long-term move. The past performance of the FTSE 100 suggests it has the capacity to experience a stock market recovery, since it continues to trade below its record high.
Of course, the uncertain economic outlook may mean that risks are elevated at the present time. As such, no positive returns can be guaranteed over any time period.
However, those risks could be factored in to the share prices of these three FTSE 100 stocks. They could be undervalued after recent mixed share price performance on a long-term view.
A cheap stock relative to other UK shares
Commercial property stocks such as British Land have largely underperformed other UK shares over recent months. Challenges include collecting rent from businesses that themselves have struggled due to lockdown measures. These have understandably caused investors to adopt a cautious approach to the sector.
However, this may be priced in to British Land’s valuation. It currently trades on a price-to-book (P/B) ratio of around 0.6. This may not reflect its potential to experience a stronger operating environment as the economy reopens following coronavirus.
Furthermore, its solid balance sheet may provide scope to reinvest in new growth areas. Meanwhile, asset disposals could allow it to pivot away from struggling sectors over the long run.
A resilient financial performance in a stock market recovery
Another FTSE 100 stock that could offer good value for money relative to UK shares is Persimmon. The housebuilder is expected to report relatively solid financial performance over the next couple of years, despite economic uncertainty. For example, its bottom line is due to rise by 9% this year and 4% next year.
Of course, factors such as changes to government tax policy and rising unemployment could negatively impact on the company’s financial performance. So too, could high house prices that lead to affordability issues. However, with a price-to-earnings (P/E) ratio of 11, Persimmon seems to offer a wide margin of safety at the present time.
Growth opportunities under a revised strategy
FTSE 100 stock HSBC has underperformed many UK shares in the last year. Its shares are down over 30% in that time. Low interest rates and a weak global economic outlook have weighed on investor sentiment towards the banking sector.
However, a forecast economic recovery in the bank’s key markets could offer a catalyst for its bottom line in the coming years. Its plans to reduce costs and develop a broader range of opportunities that are less dependent on interest rates. This may also help to counter a potential sustained period of loose monetary policy across the world.
Therefore, it could offer improving total return prospects when purchased as part of a diverse portfolio of UK shares on a long-term basis.
