The recent fall in the FTSE 100 means a number of stocks now seem to offer good value for money. Of course, further declines in the index cannot be ruled out due to the ongoing threat from coronavirus. But, over the long run, buying shares today could lead to impressive overall returns.
With that in mind, here are two FTSE 100 shares which seem to offer good value for money at the present time, given their growth potential. They could, therefore, be worth buying in a Stocks and Shares ISA with £1k, or any other amount, today.
The recent quarterly update from Sainsbury’s (LSE: SBRY) highlighted the continued challenges facing the UK’s supermarkets. Its total sales declined by 0.7% in what has been a highly competitive retail environment at a time when consumer confidence is weak.
Looking ahead, similar trading conditions may be ahead in the near term. However, Sainsbury’s could produce improving financial performance as it seeks to cut costs, close unprofitable stores, and increase its investment in growth areas such as online and convenience. In addition, its plans to reduce leverage could strengthen its balance sheet and encourage investors to become more optimistic about its long-term financial prospects.
Sainsbury’s is expected to post a 3% rise in net profit next year and in 2022. While this may appear to be disappointing, its valuation suggests that investors have factored in a difficult period for the business. It has a price-to-earnings (P/E) ratio of just 10.9, which is relatively attractive even compared to some of its retail sector peers. As such, now could be the right time to buy a slice of the business while it offers a wide margin of safety.
Another FTSE 100 company which has experienced difficult operating conditions of late is beverages business Diageo (LSE: DGE). It reported that the spread of coronavirus has disrupted its operations in China, and is likely to negatively impact on its financial outlook. This could mean that the stock misses its financial guidance in the short run, which may lead to weaker investor sentiment in the coming months.
Over the long term, of course, Diageo appears to have significant growth potential. It owns a wide range of popular, well known brands and operates in markets where growth in incomes is expected to increase the size of its customer base. It’s innovating and seeking to enhance its product differentiation versus sector peers, which also could strengthen its competitive position.
Although Diageo’s shares continue to trade at a premium to the FTSE 100, having a P/E ratio of 20.9, they could offer good value for money right now, due to their growth potential. As such, it could be an opportune moment to buy them and hold for the long run.
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...
It all adds up to a nasty cocktail with the potential to wreak havoc and send your portfolio into a tailspin.
Of course, nobody likes to see the value of their portfolio fall, but fortunately, you don’t have to go it alone. Download a FREE copy of our Bear Market Survival Guide today and discover the five steps we believe any investor can take right now to prepare for a downturn… including how you could potentially turn today’s market uncertainty to your advantage!
Peter Stephens owns shares of Diageo. The Motley Fool UK has recommended Diageo. 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.