The FTSE 100 has experienced a highly challenging period in recent weeks. Its price level has fallen by around 8% since the start of the year, with investors becoming increasingly concerned about the impact of the tragic coronavirus on company earnings.
In the short run, further falls in the FTSE 100 would be unsurprising. However, for long-term investors the index’s current woes (like all such downturns) could present a buying opportunity. A number of large-cap shares currently trade on low valuations, which may allow investors to obtain favourable risk/reward ratios.
With that in mind, here are two FTSE 100 shares that could be worth buying today while they offer wide margins of safety.
Taylor Wimpey (LSE: TW) recently reported an impressive set of results for the 2019 financial year. A 5% rise in completions boosted the housebuilder’s revenue by 6.4%, while demand for new homes has continued to be resilient.
Looking ahead, the company is forecast to post a 4% rise in its bottom line next year. Although it faces risks such as the outcome of Brexit talks and a weaker near-term outlook for the world economy, Taylor Wimpey’s price-to-earnings (P/E) ratio of 10 suggests that investors have included a wide margin of safety in its valuation.
The stock’s dividend appeal continues to be higher than most of its FTSE 100 peers. It currently yields 9%, while its net cash position and large pipeline of homes means that its dividend affordability could be relatively high.
As such, now could be the right time to buy a slice of the business. It may face a challenging near-term outlook alongside most of the FTSE 100. But with a high yield, a low valuation and the potential to benefit from resolute demand for properties in the UK, its returns could prove to be very impressive in the long run.
The recent annual results from HSBC (LSE: HSBA) highlighted that parts of its business face a difficult outlook. For example, it is now assuming a lower long-term economic growth rate across a number of its segments. This contributed to it recording a goodwill impairment of $7.3bn for the year.
Looking ahead, the bank will attempt to reduce its costs to become more competitive. Its progress looks set to be hampered by a potential slowdown in key economies across Asia due to the spread of coronavirus. This is likely to have contributed to its share price fall of 11% since the start of the year.
However, since the stock now trades on a P/E ratio of 10.2, it appears to offer good value for money. It plans to sustain its dividend over the medium term, which means that its income return of 7.4% could prove to be highly attractive.
Therefore, now could be an opportune moment to buy shares in HSBC while it is experiencing a challenging set of operating conditions. It appears to have long-term recovery potential.
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Peter Stephens owns shares of HSBC Holdings and Taylor Wimpey. The Motley Fool UK has recommended HSBC Holdings. 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.