After the recent FTSE 100 market crash, many blue-chip stocks now appear to offer a wide margin of safety.
Shares in these companies could rebound substantially over the next few months and years as the global economy recovers. As such, now could be a good time for long-term investors to snap up a share of these businesses.
FTSE 100 bargains
Shares in FTSE 100 steel producer Evraz (LSE: EVR) have slumped around 34% this year.
Clearly, the company is going to face some severe challenges going forward. Economic activity has crashed around the world. This is going to have a significant impact on the construction industry and the global demand for steel.
However, Evraz has some crucial advantages that should enable the company to weather the storm.
For example, the FTSE 100 firm is vertically integrated. So it doesn’t have to worry about sourcing key resources from suppliers. This also helps the business keep costs low.
Further, management owns a significant percentage of the business. So, they are highly incentivised to keep the lights on and make the most of the recovery when it happens. That could be one of the reasons why the company has slashed costs by a double-digit percentage already.
These initiatives imply that while the business is likely to encounter a challenging trading environment in the short term, it should prosper in the long run.
Therefore, after recent declines, the stock appears to offer a wide margin of safety of current levels.
Evraz seems to offer the potential of substantial capital gains for investors over the long run. The FTSE 100 income champion has also historically returned a large percentage of profits to shareholders via dividends. It is highly likely that the company will resume this trend when the current crisis is over.
Supply and demand
Another FTSE 100 firm that’s on my recovery radar is Taylor Wimpey (LSE: TW).
Shares in this housebuilder are down around 25% this year. This decline is understandable. The company has had to suspend operations at most of its construction sites. Lockdown restrictions have also effectively frozen the UK property market.
But despite these near-term challenges, the long-term outlook for the UK housing market remains attractive. The market remains chronically undersupplied, and with most construction currently suspended, the situation is only getting worse. This suggests that home prices could continue to rise in the long run.
Low-interest rates, as well as the government’s help-to-buy scheme, could also help to push the market higher.
Based on these assumptions, while Taylor might be facing some headwinds in the near term, the long-term outlook for the FTSE 100 business appears highly attractive.
As the government begins to water down lockdown restrictions, there could be a rush from new buyers seeking to take advantage of low-interest rates to buy their first home. That could be great news for the stock in the long run.
As such, now could be a great time to buy into this durable growth story.
Rupert Hargreaves 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.