The FTSE 100 could experience further challenges in the coming months. Risks such as a second wave of coronavirus may cause investor sentiment to weaken after its recent improvement.
However, investing today for the long term could be a shrewd move. Many of the index’s shares offer wide margins of safety that appear to factor in the uncertainties facing the world economy, which could allow them to produce high long-term returns.
Here are two such FTSE 100 stocks that could be worth buying with £1k (or any other amount) today. They could improve your chances of retiring early.
The outlook for FTSE 100 commercial property companies such as British Land (LSE: BLND) continues to be challenging. Its recent full-year results highlighted that only 68% of its total rent was collected in March, with only 43% of retail rent collected.
Of course, the company has released some of its tenants from their rental obligations for the three months to June 2020. However, with consumer confidence currently at a low ebb and unemployment figures likely to rise, many of the company’s retail customers could struggle to survive.
Despite this, British Land appears to have a solid financial position. For example, it has £1.3bn in undrawn banking facilities and cash, with no requirement to refinance until 2024. It has significant headroom regarding its debt covenants. In fact, property valuations could fall by 45% before any mitigating actions are required.
Furthermore, with the FTSE 100 stock trading 26% lower than it was at the start of the year, it appears to offer a wide margin of safety. It may not pay a dividend in the near term, but British Land seems to have the capacity to deliver capital growth over the coming years.
FTSE 100 miner Glencore
Another FTSE 100 share that appears to offer a wide margin of safety is Glencore (LSE: GLEN). Its shares are down by 25% since the start of the year, with investor sentiment towards the resources sector currently being weak due to a lacklustre near-term outlook for the global economy.
The company’s recent quarterly update highlighted that the majority of its assets are operating normally. It has also benefited from lower energy costs that have helped to reduce its overall expenses, which could stabilise its financial performance in the near term.
Furthermore, the volatility of commodity markets has presented opportunities for Glencore’s marketing sector. It is performing within its previous guidance in terms of profitability for the current year and could help to offset lower demand for commodities in the coming months.
Clearly, reduced global economic activity is likely to weigh on Glencore’s share price in the near term. However, it could offer investment appeal over the long run as a result of its low share price, sound strategy and the quality of its asset base.
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Peter Stephens owns shares of British Land Co. The Motley Fool UK has recommended British Land Co. 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.