Trying to time the FTSE 100’s market crash is likely to prove highly challenging. After all, its near-term prospects are closely linked to news flow surrounding coronavirus. Since this is near-impossible to accurately predict, share prices could move higher or lower in the near term.
However, valuations across the FTSE 100 suggest now is the right time to buy large-cap shares for the long run. A number of the index’s members offer growth potential at relatively low prices.
Here are two prime examples of FTSE 100 shares that, while having uncertain near-term prospects, could deliver high returns in the coming years.
Morrisons (LSE: MRW) reported a mixed performance in its 2020 full-year results. The company’s sales declined by 1.1%, as challenging trading conditions persisted. However, it was able to make progress in areas such as wholesale. During the year, 240 McColl’s convenience stores transitioned to Morrisons banners. This could enhance the company’s exposure to the growing convenience store segment over the coming years.
Clearly, the business is operating in exceptional circumstances at present. Demand for a variety of products has increased in recent weeks. The near-term prospects for Morrisons are likely to be uncertain. But the company’s investment in online operations could leave it in a strong position to capitalise on the growth prospects for grocery deliveries.
Having fallen by 9% since the start of the year, the supermarket’s shares now trade on a price-to-earnings (P/E) ratio of 13. There are cheaper stocks in the FTSE 100, as well as in the retail sector. But the growth potential of Morrisons means it could offer fair value for money. As such, it now seems to be worth buying for the long term.
Another FTSE 100 share that could offer long-term growth prospects is ABF (LSE: ABF). The Primark owner is experiencing a very challenging period, announcing recently that all of its clothing stores are closed. This represents a loss of £650m in net sales per month.
However, parent ABF is making changes to its operations to mitigate the impact of coronavirus on its sales. For example, it’s reducing discretionary spend and has ceased ordering new items for sale within its Primark stores. It’s also negotiating with landlords to delay or cease rent payments in the short term. This, the company believes, could allow it to recover around half of its net sales per month.
Of course, ABF has a strong balance sheet with £800m in net cash. Therefore, it seems highly likely to survive the current challenges faced by the retail sector.
Moreover, its operations in other sectors, such as ingredients and sugar, have thus far not been impacted by coronavirus. As such, the company could offer investment appeal after its share price decline of 32% since the start of the year.
Peter Stephens owns shares of Morrisons. The Motley Fool UK has recommended Associated British Foods. 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.