Why I’d buy these 2 FTSE 100 shares in a Stocks and Shares ISA today to make £1m

I think these two FTSE 100 (INDEXFTSE:UKX) stocks could offer long-term growth potential.

| 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 could offer significant growth potential in the coming years. A number of its members currently trade on low valuations when their future prospects are taken into account.

Furthermore, when purchased through a Stocks and Shares ISA, the FTSE 100 offers tax-efficiency for investors that could improve their long-term return prospects.

As such, now could be the right time to buy these two FTSE 100 stocks. They appear to offer good value for money at their current price levels, and could improve your chances of making a million.

Barratt Developments

The near-term prospects for housebuilders such as Barratt (LSE: BDEV) continue to be highly uncertain. Brexit, the general election and weak consumer confidence could combine to create challenging operating conditions for the wider sector.

However, the stock’s price-to-earnings (P/E) ratio of 9 shows that it may offer a wide margin of safety at the present time. As such, the risks it faces could be factored into its market valuation. This could present a buying opportunity for long-term investors.

Even if Barratt experiences a difficult period, its strong balance sheet could enable it to produce a relatively resilient performance. Since interest rates are expected to continue at their low level over the coming years, and demand for new-build property could be robust, the company’s financial performance may be more resilient than its current valuation suggests.

Therefore, on a risk/reward basis, the housebuilder may have investment appeal. Its recent updates have shown that demand for new properties has been high despite political and economic risks facing the UK being significant. This could mean that it offers capital growth potential in the long run.

Segro

Another property-focused FTSE 100 company that may offer long-term growth potential is logistics business Segro (LSE: SGRO). Its recent updates have shown that it has enjoyed strong demand despite macroeconomic uncertainties. In fact, in its most recent quarter, it added further land and assets as it seeks to meet rising demand for new warehousing space.

Over the coming years, the company could experience resilient growth. Trends such as urbanisation and technological change mean that many businesses are investing in upgraded supply chains that provide greater convenience for consumers, as well as lower costs. Segro has over one million square metres of new space currently under construction. Therefore, its rental income could increase substantially over the next few years.

The stock currently trades on a price-to-book (P/B) ratio of 1.4. This suggests that it offers good value for money, and may be worthy of a higher valuation. Clearly, the performance of the UK economy could impact on its financial prospects. But with structural changes to the economy likely to benefit its performance in the long run, it could deliver a rising bottom line that encourages its share price to do likewise.

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 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.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »