The FTSE 100 may have rebounded following its market crash, but the future for many of its members continues to be highly uncertain. As such, investing in FTSE 100 shares today means there is a very real threat of paper losses in the short run.
However, over the long run many of the index’s members could offer turnaround potential from their low share prices. As such, buying a diverse range of them now could prove to be a shrewd move.
With that in mind, here are two FTSE 100 shares that may experience challenging near-term futures. But they could also offer impressive total returns in the coming years.
WPP’s (LSE: WPP) recent quarterly update highlighted the impact that coronavirus is having on its financial performance. Its revenue declined by almost 5% during the period, with an economic slowdown in China being a major contributor.
The FTSE 100 business looks set to report further declines in its revenue, as the impact of lockdowns across many of its key markets is felt. As such, investors appear to be factoring in a challenging period for the company. Its share price is currently down almost 50% since the start of the year.
In the long run, WPP could be well placed to benefit from an economic recovery. Over recent years it has focused on becoming simpler, more efficient and increasingly focused on growth areas such as technology. It has a lower debt level following the sale of a number of its businesses. And it all means it appears to be in relatively strong shape to overcome challenging short-term trading conditions to deliver a recovery over the coming years.
As such, now could be the right time to buy a slice of the FTSE 100 company while it offers a wide margin of safety.
FTSE 100 bank RBS
Another FTSE 100 share that faces challenging trading conditions is RBS (LSE: RBS). The bank recently reported that its first-quarter results declined by over 50% due largely to the negative impact of coronavirus on its financial prospects.
With the UK likely to be in a recession at the present time, trading conditions across the banking sector could worsen in the short run. Sentiment among consumers and businesses could decline, which could negatively affect demand for loans.
Investors appear to be anticipating a challenging future for RBS. Its shares have declined by 55% since the start of the year. This could mean that many of the risks faced by the FTSE 100 bank are priced-in to its valuation, which may lead to capital growth potential over the coming years.
Furthermore, RBS has been able to improve its balance sheet strength over recent years, and has the capacity to reduce costs over the medium term. It could, therefore, be well placed to capitalise on the UK economy’s long-term recovery prospects. But you need to note that there are significant risks ahead in the short run.
Peter Stephens owns shares of Royal Bank of Scotland Group and WPP. 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.