2 FTSE 100 stocks I’d buy in March

If the first couple of months of 2017 are anything to go by, the rest of 2017 could be volatile and highly uncertain. As such, it may feel as though it is the wrong time to buy shares. After all, their prices could fall somewhat during the course of the year and investors may experience paper losses.

However, it may be easier at the present time to find stocks with wide margins of safety, given the uncertain outlook. With that in mind, here are two shares which appear to be cheap and which may provide stunning long-term capital gains.

Growth potential

Wealth management specialist St. James’s Place (LSE: STJ) has outperformed the FTSE 100 by 5% this year. Its shares have risen 7% year-to-date. Looking ahead, further outperformance could be on the cards. A key reason for this is the company’s upbeat growth outlook. Its bottom line is expected to rise by 35% in the current year and by a further 20% next year. This has the potential to improve investor sentiment in the stock. Furthermore, since its shares trade on a price-to-earnings growth (PEG) ratio of 1.1, they seem to offer excellent value for money.

Such rapid growth is also expected to allow St. James’s Place to increase dividends at an annualised rate of 16.5% over the next two years. This puts the company’s shares on a forward yield of 4%. This is likely to be ahead of inflation during the 2017/18 period and could lead to greater demand for its shares from income-seeking investors.

Certainly, St. James’s Place may experience a degree of turbulence over the next couple of years if share prices remain volatile. But for long-term investors, the attraction of its income outlook, growth potential and low valuation mean it could prove to be a profitable buy.

Value opportunity

Shares in packaging specialist Smurfit Kappa (LSE: SKG) have risen by 27% in the last three months. That’s 20% higher than the FTSE 100’s gain during the same time period. Despite this, the company continues to trade on what appears to be a discounted valuation. For example, in the last five years its price-to-earnings (P/E) ratio has averaged 14.4, while today it stands at just 12.6. This indicates there is significant scope for an upward re-rating to take place over the medium term.

Making a higher valuation more likely is Smurfit Kappa’s forecast growth rate. It is expected to record a rise in its earnings of 7% in the next financial year, which puts its shares on a PEG ratio of 1.8. Given the relatively defensive nature of the business, this indicates that a wide margin of safety is on offer. And since dividends are covered 2.6 times by profit, there is a relatively high chance of inflation-beating dividend growth over the medium term. This could boost Smurfit Kappa’s yield from the current 3.1% level in order to make it a sought-after income stock.

Avoiding mistakes

Of course, St. James's Place and Smurfit Kappa may be sound buys right now. However, a number of other FTSE 100 stocks could fall in price during the coming months. That's why the analysts at The Motley Fool have written a guide called The Worst Mistakes Investors Make.

The guide identifies some of the most common pitfalls and dangers facing investors. Therefore, it could help you to avoid losses this year, making 2017 an even better year for your portfolio.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.