Some FTSE 100 shares have experienced catastrophic losses over recent months. In the short run, further falls could be ahead as the spread of coronavirus is expected to intensify.
While this may not seem to be the right time to buy stocks, history shows that purchasing high-quality companies following major declines in their valuations can lead to long-term profits.
As such, here are two FTSE 100 stocks that have fallen heavily in recent months. Their valuations suggest they could be worth buying today and holding for the long run.
The share price of easyJet (LSE: EZJ) has fallen by around 40% over the last month. Clearly, the spread of coronavirus throughout Europe has caused disruption to the airline industry. That means consumers may become increasingly averse to travelling.
This could negatively impact on easyJet’s financial performance at a time when its outlook was already relatively uncertain. Risks such as Brexit and a competitive airline industry had weighed on its stock price over recent years.
However, the company is focusing on maintaining a disciplined stance on costs and investing in new technology to become more efficient. It is also expanding into new areas such as holidays, so its growth strategy seems to be sound.
Its price-to-earnings (P/E) ratio of 8.8 suggests that investors have factored-in many of the challenges faced by the business. Although further declines in its market valuation may be ahead, and its financial performance could come under pressure, it could deliver long-term capital growth.
For investors who can ignore the prospect of paper losses in the short run, now could be the right time to buy a slice of the stock and hold it for the long run.
Another FTSE 100 share that has experienced an uncertain period is Morrisons (LSE: MRW). Its share price has fallen by around a third over the past 18 months. Much of this has been due to weak consumer confidence that has contributed to a slow pace of growth for the retailer.
In fact, in its recent update, Morrisons reported a fall in sales and difficult operating conditions. They could continue over the coming months, and may be further impacted by the spread of coronavirus in the UK.
As a result, investors seem to be pricing-in the prospect of a challenging period for the business. This has left Morrisons trading on a P/E ratio of 13.1. This suggests that it offers good value for money on a long-term investment outlook.
Yes, the retailer faces risks in the short run that could mean further share price declines. But its expansion into wholesale, its investment in online grocery shopping, and the gains it is making in improving customer loyalty are all good. They may lead to a strong recovery over the coming years. Therefore, the stock could offer long-term investment potential.
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Peter Stephens owns shares of easyJet and Morrisons. 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.