A number of FTSE 100 shares have recorded significant price falls of late. The spread of coronavirus looks set to cause a slowdown in global growth. This has caused investors to readjust their expectations regarding the profitability of FTSE 100 shares, which has contributed to a severe decline in the index.
Buying falling shares that are falling can be a challenging process. It may lead to losses in the short run, but can enable you to benefit from a possible recovery in the long run. Here are two large-cap shares that have declined sharply in recent weeks, but seem to offer long-term turnaround potential.
Burberry (LSE: BRBY) is set to be negatively impacted by the spread of coronavirus. On 7 February, the luxury fashion group reported that 24 of its 64 stores in Mainland China are closed, with the remainder of the locations operating reduced hours. Additionally, concerns among consumers about the disease means that footfall to those stores is lower than it otherwise would be.
As a result of the potential for Burberry to experience lower sales in what is a key market for the business, investor sentiment has weakened sharply in recent months. For example, since the start of 2020, the company’s share price has declined by around 26%. Further falls cannot be ruled out, which may mean investors experience paper losses in the near term.
However, in the long run, Burberry could offer recovery potential. Its new product line-up has been popular with customers, it’s reducing costs, and its push towards sustainability and online marketing could increase its appeal among a younger demographic.
Therefore, now could be an opportune moment to buy shares in what’s a high-quality business. Its recovery may take time, but the stock may prove to be an attractive purchase right now.
Another FTSE 100 share which could offer long-term recovery potential to boost your retirement prospects is insurance giant Aviva (LSE: AV). Its recent results showed that profit reached a record level, while reporting rising customer numbers and satisfaction scores.
Despite this, the company’s shares have continued to be unpopular among investors. They have fallen by 18% since the start of the year, and now trade on a price-to-earnings (P/E) ratio of just 6.2. This suggests they offer a wide margin of safety – especially since Aviva is expected to report a 7% rise in its bottom line next year.
As well as its low valuation and growth potential, the stock has a relatively impressive income outlook. It recently increased its dividends by 3% so that it now has a yield of over 9%. With its profit set to rise and it focusing on reducing costs and strengthening its balance sheet, the stock’s total returns could prove to be highly attractive in 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 Aviva. The Motley Fool UK has recommended Burberry. 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.