The market recently experienced one of its most severe crashes in history. As such, buying FTSE 100 shares in the current environment may seem like a risky prospect. However, these blue-chip companies have the potential to deliver significantly higher returns than other assets over the long run.
Therefore, now could be a great time to take advantage of the recent market slump and snap up FTSE 100 shares on the cheap. Here are two large-cap companies that appear to offer value after recent declines.
FTSE 100 shares on offer
The government’s decision to close building sites in response to the coronavirus crisis hurt sentiment towards homebuilders such as Berkeley Group (LSE: BKG). As a result, shares in the FTSE 100 builder have fallen nearly 20% this year.
Clearly, the outlook for the UK housing market remains uncertain in the near term. Nevertheless, over the long run, the market should recover as it remains structurally undersupplied.
Further, government initiatives such as the help to buy scheme and low-interest rates should help drive demand in the years ahead. These initiatives could help demand return to pre-crisis highs relatively quickly.
The post-coronavirus economy may look very different from the one we have today, but people will always need houses. This suggests that while Berkeley’s earnings might remain volatile in the short run, growth should pick up over the medium term.
So, the company could be a profitable FTSE 100 investment over the coming years.
Defensive FTSE 100 shares, such as Compass Group (LSE: CPG), could also produce attractive returns over the long run. City analysts are expecting this company’s earnings to fall by around 26% this year. That’s a significant drop, and these forecasts seem to have terrified investors. The stock is off approximately 40% this year.
However, while the group might face an uncertain few months ahead, the world’s largest catering organisation almost certainly has a bright future. People always need to eat. And Compass, as the world’s largest caterer, can provide the best food at the lowest cost.
This implies that when the global economy begins to recover, Compass is well-placed to capitalise on the recovery. Its size should also help the business.
For the past few years, the FTSE 100 corporation has a strong track record of acquiring smaller peers. This has helped the company grow sales at around 8% per annum for the past six years.
The current economic situation may mean many of the group’s smaller competitors are struggling to survive. This could allow the more substantial business to sweep down and pick them up, acquiring growth at a reasonable price.
Considering all of the above, now could be a great time to take advantage of the market’s short-term nature and snap up shares in Compass. The company appears to have all the hallmarks of a business that should prosper over the long run.
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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Compass Group. 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.