Investing in crashing FTSE 100 stocks may not seem to be a good idea at the present time. Less risky assets such as Cash ISAs and gold may offer greater stability during what is a period of unprecedented uncertainty for the world economy.
However, many FTSE 100 companies now offer wide margins of safety. Investors seem to have factored-in many of the risks facing the global economy. That means there may be recovery potential over the long term.
With that in mind, here are two property-related companies that could be worth buying today and holding over the coming years.
FTSE 100 real estate investment trust (REIT) Segro (LSE: SGRO) has recorded a 16% drop in its share price since the turn of the year. The warehouse owner recently updated the market on its performance. And it acknowledged that coronavirus is likely to place pressure on the financial performance of many of its tenants.
This may cause a further decline in the company’s shares. But as investors adapt to a potentially lower level of occupancy and profitability, the long-term outlook for the business seems to be sound. Consumers are increasingly purchasing various goods online. The result is that this may boost demand for modern warehouses. This could lead to rising rents for the business, as well as a high occupancy rate.
Segro’s shares now trade on a price-to-book (P/B) ratio of 1.1 following their recent fall. Yes, there are cheaper opportunities available elsewhere in the REIT sector. But the company’s stock price appears to include a wide margin of safety.
With Segro set to experience improving operating conditions as demand for warehouse space increases, now could be the right time to buy a slice of the business for the long term.
Housebuilders such as Taylor Wimpey (LSE: TW) are experiencing a highly challenging period at the present time. That is because the UK housing market is essentially on hold during the coronavirus outbreak. How long this situation lasts is a known unknown, but the company’s financial standing suggests that it is in a relatively strong position to overcome it.
Of course, the housing market has experienced many booms and busts over recent decades. As a cyclical market, this enables long-term investors to capitalise on low valuations to benefit from subsequent recoveries.
Although further difficulties could be ahead for the sector, factors such as low interest rates and government schemes such as Help to Buy could act as catalysts on the industry over the coming years. Limited housing supply may also be a contributing factor in the eventual recovery of the sector.
Since Taylor Wimpey’s shares now trade on a price-to-earnings (P/E) ratio of 5.4, they seem to offer a wide margin of safety. Certainly, a drop in net profit this year is very likely. But with a strong financial position and the prospect of improving operating conditions, now could be a good time to capitalise on the sector’s weak near-term outlook through buying shares in Taylor Wimpey.
Peter Stephens has no position in any of the shares mentioned. 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.