Timing the FTSE 100 is always a difficult task. But it’s even more challenging during a stock market crash. News flow surrounding coronavirus is impossible to accurately predict. And this means the index could move sharply upwards or downwards in the short run.
However, in the long run the FTSE 100 could have recovery potential. It has a solid track record of recording successful comebacks from its downturns.
As such, now could be the right time to buy these two FTSE 100 shares. Yes, they may face uncertain near-term futures. But their valuations suggest that they offer wide margins of safety.
Coronavirus is having a significant impact on the financial prospects of housebuilder Barratt (LSE: BDEV). The company released an update recently that showed it is seeking to offset reduced sales by a number of measures. These include postponing recruitment, suspending all land buying activity and delaying all non-essential capital expenditure.
These actions could help to mitigate the impact of a sharp fall in demand for new homes in the short run. Furthermore, the business has a cash pile of £380m. This could place it in a relatively sound position from which to recover as economic activity in the UK gradually ramps up.
Barratt’s shares have declined by 37% since the start of the year. They could experience further declines in the short run, of course. But likewise, they may experience a strong recovery as the UK’s lockdown is gradually eased.
With a loose monetary policy now set to remain in place over the medium term, the affordability of new homes may have increased as a result of coronavirus. As such, now could be the right time to buy shares in Barratt while they appear to offer a wide margin of safety.
Another FTSE 100 company that faces a highly uncertain near-term outlook is ITV (LSE: ITV). It has taken measures to reduce its costs, as demand for TV advertising is likely to experience a sharp decline due to reduced economic activity and weak consumer confidence. In fact, in the company’s recent updates it has highlighted that demand for advertising has fallen across a broad range of sectors.
Of course, ITV had already been facing difficult operating conditions prior to coronavirus. Its investments in areas such as streaming services and digital operations could improve its competitive position in the long term. Its plans to become more efficient may also act as a catalyst on its bottom line in the coming years.
The stock’s decline of 56% since the start of 2020 highlights its cyclicality and its reliance on the UK economy for the vast majority of its revenue. Although further falls in its share price cannot be ruled out in the near term, the company’s financial strength and long-term strategy may enable it to deliver a sound recovery over the coming years.
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Peter Stephens owns shares of Barratt Developments. The Motley Fool UK has recommended ITV. 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.