The doubling of the price of Bitcoin this year could lead many investors to think that it offers growth potential. However, with it lacking fundamentals and having potential regulatory challenges, its risks appear to be as high as ever.
Therefore, from a risk/reward standpoint, the FTSE 100 could offer a superior outlook for 2020. A number of its members currently have low valuations, as well as growth potential.
Here are two prime examples of stocks that could be worth buying today, with them offering high total return potential in 2020 and beyond.
A combination of higher costs and lower-than-expected production contributed to a difficult first half for silver and gold miner Fresnillo (LSE: FRES). The company’s recent production update showed that production is set to be at the lower end of previous guidance for the full year.
As such, the company has been unable to capitalise on the rising prices of gold and silver over the past 12 months. This has caused investor sentiment to deteriorate, with its bottom line now expected to fall by 46% in the current year. As a result, it is expected to drop down to the FTSE 250 in the next reshuffle.
However, this could present a buying opportunity for long-term investors. The company is making progress in rectifying the issues that have held back its performance in recent quarters, and is forecast to post a rise in net profit of 39% next year. This puts its shares on a price-to-earnings growth (PEG) ratio of just 0.6, which suggests they have strong recovery potential.
Certainly, Fresnillo’s dividend yield of 1.8% may not sound especially appealing at the present time. However, it is expected to be covered 3.4 times by net profit in the current year and is forecast to rise by 40% next year. Therefore, it could become an increasingly desirable income share that experiences a successful share price recovery.
Another FTSE 100 share that could offer an improving dividend outlook is GSK (LSE: GSK). The pharmaceutical company has frozen dividends per share in recent years, and they are now covered 1.5 times by net profit. This suggests that an increasing shareholder payout may be ahead, as the business repositions itself as an increasingly pharma-focused entity.
The company recently reported growth across all of its major divisions. It is investing in improving its pipeline, which could enable it to capitalise on rising demand for drugs as the world’s population grows and ages.
With GSK trading on a price-to-earnings (P/E) ratio of 14.2, it seems to offer good value for money even after its shares have made gains in recent months. It could become increasingly popular among investors due to its growth potential, as well as its defensive characteristics, in what could prove to be an uncertain period for the world economy. As such, now could be the right time to buy a slice of it for the long term.
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Peter Stephens owns shares of Fresnillo and GlaxoSmithKline. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended Fresnillo. 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.