The FTSE 100’s decline since the start of the year had been largely unexpected. And it has left many of its members recording severe drops in their valuations.
While that situation could continue in the near term, it may provide a buying opportunity for long-term investors. The index has always recovered from its challenges to post new record highs, and a similar result could be ahead in the long run.
With that in mind, here are two FTSE 100 stocks which have fallen 40%+ since the start of the year. They could be worth buying in an ISA right now, and holding for the long term.
The recent annual results from Next (LSE: NXT) highlighted the uncertainty faced by the retailer at the present time. It expects to record a severe decline in demand across its business. Its clothing is likely to be hit hard by store closures and restrictions on people’s movement.
Although Next has invested heavily in its website over recent years, it expects consumers to spend less given the economic uncertainty facing the UK. And of course, if consumers do not go out, they will not need to buy new clothes. This has caused the business to adopt a degree of caution regarding its future prospects. For example, it has reported a second interim dividend, rather than a final dividend, for the full year. This provides it with greater flexibility in terms of payment, which could aid its financial position.
Of course, Next has a solid balance sheet, strong cash flow and a history of being relatively successful at overcoming challenging market conditions. While it trades on a price-to-earnings (P/E) ratio of 7.5 after its 42% share price decline since the start of the year, it could offer good value for money and turnaround potential.
Another FTSE 100 share which has been severely impacted by coronavirus is Barclays (LSE: BARC). Its shares have declined by 52% since the start of the year. The outlook for the bank has deteriorated due to the prospect of lower business activity caused by restrictions on movement and business closures. It may also find it more difficult to produce improving levels of profitability as a result of interest rates now being at historic lows.
Looking ahead, Barclays could offer good value for money following its recent share price fall. The bank recently reported that its balance sheet strength has improved over recent years. This may help to reduce its risk relative to some of its peers. Furthermore, with its shares now trading on a P/E ratio of just 6, they appear to offer a wide margin of safety.
Certainly, in the short run there could be further falls in the Barclays share price. But long-term investors who are able to look beyond the near term may generate high returns from purchasing the stock in an ISA and holding it for the long run.
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Peter Stephens owns shares of Barclays. The Motley Fool UK has recommended Barclays. 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.