While the prospects for the world economy may be uncertain at the present time, now could be a good time to buy FTSE 100 stocks.
In many cases they offer wide margins of safety, as well as impressive growth potential. As such, they may deliver strong returns in the long run that improve your financial situation and allow you to retire earlier than planned.
With that in mind, here are two large-cap stocks that appear to offer bright long-term futures given their current valuations.
International specialist insurer Hiscox (LSE: HSX) released a trading update on Thursday for the first six months of 2019. The company has reduced its pre-tax profit guidance for the period due in part to a deterioration in the insurance market from catastrophe events in 2018. It now expects to deliver a pre-tax profit of between $150m and $170m for the first half of the year, with the majority of this being made up of investment returns that benefitted from market movements in the second quarter.
As a result of its reduced profit guidance, the company’s shares declined by around 5% following the update. With the company now having a lower level of earnings buffer to absorb the impact of catastrophe events ahead of hurricane season, its near-term prospects could be relatively uncertain.
However, with Hiscox’s retail division continuing to deliver impressive growth, it could offer long-term investment potential. The stock now trades on a price-to-earnings (P/E) ratio of around 17, which suggests that it could offer a margin of safety relative to its historic valuation range. Although the stock could experience a volatile near-term period, it has the potential to beat the FTSE 100 over the coming years.
Housebuilder Barratt (LSE: BDEV) may also experience a challenging period over the short run. The housebuilding sector faces an uncertain outlook as a result of the political and economic risks facing the UK. For example, government policy towards the sector may change, and this could lead to a more difficult period for industry incumbents. Furthermore, weak consumer confidence may lead to reduced demand for new homes if the Brexit process encounters additional challenges.
However, investors appear to have factored in the risks facing Barratt. For example, it trades on a P/E ratio of 9.4 at the present time, which suggests that it offers a wide margin of safety. The company is also in a strong financial position, with its balance sheet having improved since the financial crisis. This could allow it to overcome a future downturn for the housing market, and emerge in a strong position relative to sector peers.
Therefore, while risks may be elevated at the present time, the potential returns from investing in Barratt could be highly attractive. As such, for long-term investors who are seeking to get rich and retire early, it could prove to be a worthwhile investment.
Peter Stephens owns shares of Barratt Developments. 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.