In less than four months, the Bitcoin price has fallen by around 36%. This highlights the volatility of the virtual currency, while its lack of fundamentals also means it’s difficult for investors to know whether it now represents good value for money.
As such, from a risk/reward perspective, it may be a better idea to buy FTSE 100 shares. In many cases, they offer improving growth prospects that could boost their valuations over the long run.
With that in mind, here are two large-cap shares which appear to offer favourable long-term investment prospects at present. Buying them through a Stocks and Shares ISA could provide tax efficiency and, ultimately, higher returns than Bitcoin.
FTSE 100 housebuilder Persimmon (LSE: PSN) reported solid operating conditions in its recent half-year results. This shows that while the outlook for the wider economy remains challenging, the housebuilding sector continues to benefit from factors such as a lack of supply versus demand, low interest rates, and government policies such as stamp duty relief.
Looking ahead, Persimmon may experience an increasingly uncertain period. Political and economic risks are high, but the business appears to have a solid financial position through which to overcome weaker trading conditions. For example, it has a net cash position of £824m that should provide it with the financial flexibility it requires to capitalise on what could prove to be a weaker period for the wider property industry.
In addition, the stock trades on a price-to-earnings (P/E) ratio of just 8.5. This could mean investors have factored in the risks faced by the business, with the company’s market valuation suggesting it offers a wide margin of safety. As such, long-term investors may be able to take advantage of weak investor sentiment to buy a slice of Persimmon while its risk/reward ratio appears to be highly appealing.
Another FTSE 100 stock that could offer high returns over the long run is Burberry (LSE: BRBY). The high end fashion house is currently undergoing a period of change, as it seeks to reduce costs and focus on luxury products in order to boost its financial returns.
The company’s recent updates have shown it’s making strong progress in implementing a new strategy. It’s also focusing on social and environmental concerns in order to resonate with customers, while the business continues to have strong growth prospects due to its position in emerging markets such as China.
Although Burberry’s shares currently trade on a P/E ratio of 22, its financial outlook is improving. For example, it’s forecast to post a rise in its net profit of 7% this year, followed by growth of 10% next year. As such, now could be the right time to buy a slice of the business, with it offering high return prospects over the coming years as it executes its strategy.
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Peter Stephens owns shares of Persimmon. The Motley Fool UK has recommended Burberry. 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.