The FTSE 100 has fallen by around 1,000 points since the start of the year. It’s experienced its third largest weekly fall on record, which highlights how significantly investor sentiment has weakened towards the prospects of its members.
While further falls in the short run cannot be ruled out, the FTSE 100 appears to offer long-term growth potential. As such, now could be the right time to buy large-cap shares when they trade on low valuations.
With that in mind, here are two shares that could be worth buying today and holding over the coming years.
The recent trading update from Tesco (LSE: TSCO) showed the retailer has performed well despite experiencing challenging trading conditions. For example, it outperformed the wider supermarket segment in terms of volume and value of sales.
It has also been able to improve the quality of its products and deliver higher customer satisfaction ratings over the past few years. This could strengthen its market position and improve its financial prospects. Alongside this, Tesco has become more innovative. For example, it’s using a greater amount of technology to reduce its costs, while features such as Clubcard Plus, which offer discounts to its customers, could resonate with shoppers at a time where sentiment is weak.
Looking ahead, Tesco is forecast to post a rise in its net profit of 8% this year and 7% next year. They would represent a solid performance which is ahead of many of its segment peers. As such, while the company trades on a price-to-earnings (P/E) ratio of 12.8, it seems to offer good value for money and may be worth buying now for the long term.
The FTSE 100 may have fallen by around 15% since the start of the year, but mining companies such as BHP (LSE: BHP) have been hit even harder by a weakening in investor sentiment. The diversified mining company has shed around 21% of its value since the start of the year, with its high degree of cyclicality counting against it during market corrections and downturns.
In the short run, investors may maintain a cautious stance towards the resources sector. A global economic slowdown may cause commodity prices to fall, which could impact negatively on BHP’s financial performance.
However, with the company having a solid balance sheet and a competitive position on costs relative to its peers, it could outperform the wider resources industry. Furthermore, it now trades on a P/E ratio of just 9.7 after its recent share price fall. This indicates it offers a wide margin of safety, and that there may be scope for a significant recovery over the coming years.
As such, now could be the right time to buy it while investor sentiment towards the wider sector is weak.
It’s official: global stock markets have been on a tear for more than a decade, making this the longest bull market in history.
But this seemingly unstoppable run of success poses an uncomfortable question for investors: when will the current bull market finally run out of steam?
Opinions are split about whether we’re about to see a pullback — or even a bear market — in 2020. But one thing is crystal clear: right now there’s plenty of uncertainty and bad news out there!
It’s not just the threat posed by the coronavirus outbreak that could cause disruption — Trump’s ongoing trade-war with China and the UK’s Brexit trade negotiations with the EU rumble on... and then there’s the potential threat of both the German and Japanese economies entering recession...
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Peter Stephens has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesco. 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.