Investing in companies that rely on the UK economy has not been popular over the past few years. Political and economic risks have combined to produce a heightened sense of caution among UK investors.
This could mean there are buying opportunities in FTSE 100 stocks that are dependent on the UK economy for their growth. Over the long run, such stocks could deliver high total returns that help to improve your chances of retiring early and reduce your dependency on the State Pension.
Here are two stocks that could offer good value for money as a result of what appear to be sound growth strategies that may catalyse their financial performances.
The recent performance of FTSE 100 retailer Next (LSE: NXT) has been relatively robust. For example, its fourth quarter full-price sales increased by 5.2% versus the previous year. This was 1.1% ahead of the company’s forecasts, and caused its full-year sales to rise by 3.9% in what has continued to be a tough operating environment for high street retailers.
Next appears to be making headway in embracing technological change. It has invested in its website and supply chain over the past few years, and now has a solid omnichannel offering that is appealing to a wide customer base. This could help it to maintain a relatively strong financial performance at a time when consumer confidence is at a low ebb, and is forecast to remain so over the coming months.
Looking ahead, the company is forecast to post a rise in its bottom line of 4% this year. Although this may not be an especially fast pace of growth, Next seems to be well-placed to produce improving financial performance as it makes further investments in its online growth opportunities.
Another FTSE 100 share that is highly dependent on the UK economy for its sales is Premier Inn owner Whitbread (LSE: WTB). The company’s disposal of Costa meant that its international exposure lessened to some degree. However, it is investing in countries such as Germany, where the budget hotels segment is highly fragmented and could enable the business to quickly gain market share.
Whitbread has a large pipeline of new rooms, both in the UK and in international markets, which could strengthen its financial prospects in the long run. In the near term, its value proposition and high customer satisfaction ratings are proving popular among price-conscious consumers. As such, it is forecast to post a rise in its bottom line of 19% in the current year and 13% next year.
Despite its improving financial prospects, the stock trades on a price-to-earnings growth (PEG) ratio of just 1.4. This suggests that it offers good value for money and may be able to deliver impressive investment returns over the long run that improve your prospects of retiring early.
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Peter Stephens owns shares of Whitbread. 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.