The long-term prospects for the FTSE 100 could be more attractive than those of buy-to-let properties. In many cases, large-cap shares offer appealing valuations and growth potential that could help them to outperform buy-to-let investments.
With that in mind, now may be the right time to buy these two FTSE 100 shares. They have both experienced uncertain operating conditions of late, but appear to have the strategies required to generate improving financial performance.
Weak consumer confidence may cause many investors to determine that now is the wrong time to buy Sainsbury’s (LSE: SBRY). The supermarket has experienced tough operating conditions for many years, with a high degree of competition and an increasingly online-focused operating environment contributing to a disappointing financial period.
The retailer’s recent update highlighted some of the changes it is making to its strategy to improve its performance. This is partly in response to the disappointment that came about after the deal to merge with Asda fell through. As such, Sainsbury’s will seek to cut costs, close unprofitable stores and invest in pricing to improve its competitive position.
These changes may lead to higher costs in the short run, but they could strengthen its position versus other supermarkets. Furthermore, with wage growth and unemployment levels being relatively strong, consumer confidence could improve over the long run. This may cause shoppers to be less price-conscious and more interested in other factors such as convenience and quality. Sainsbury’s could, therefore, experience an improving operating environment.
With its shares currently trading on a price-to-earnings (P/E) ratio of just 11.7, they seem to offer good value for money. Its dividend yield of 4.6% suggests that an impressive total return could be ahead in the coming years.
Also experiencing tough operating conditions of late is fellow FTSE 100 company Reckitt Benckiser (LSE: RB). Its quarterly update highlighted challenges in key markets such as the US and China. They could continue over the near term, and have caused the business to focus its efforts on delivering operational improvements in the short run.
As may be expected, investors have become increasingly cautious about the company’s prospects. Its share price has fallen, with a new CEO and an uncertain global operating environment being potential risk factors.
Reckitt Benckiser currently trades on a P/E ratio of around 18. Although this is higher than the ratings of many of its FTSE 100 index peers, it represents a discount to the company’s recent valuations. This could indicate that there is a margin of safety on offer, and the stock’s investment appeal may have improved as a result.
For investors who can look beyond the short-term risks faced by the business, now could be the right time to buy a slice of it. The growth trends across emerging markets could provide a tailwind that boosts its financial performance in the long run.
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Peter Stephens owns shares of Reckitt Benckiser. 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.