The FTSE 100 may have an uncertain future, but its long-term return prospects appear to be relatively attractive. Low interest rates mean that cash and bonds lack return potential in many cases, while buy-to-let property returns could be negatively impacted by factors such as rising unemployment.
As such, now could be the right time to buy a diverse range of large-cap shares while they offer good value for money. Here are two FTSE 100 stocks that appear to have wide margins of safety. They could be worth buying today with £5k, or any other amount, to improve your prospects of retiring in comfort.
The recent results released by FTSE 100 retailer Sainsbury’s (LSE: SBRY) showed that coronavirus continues to have a major impact on its sales performance. For example, in the seven weeks to 25 April, the company reported a 12% rise in grocery sales. However, this was partially offset by a 53% drop in clothing sales, as consumers adapted their spending to lockdown measures.
Looking ahead, it would be unsurprising for similar trends to remain in place over the coming months. It may take time for consumer confidence to improve. And this could mean that demand for non-essential items is relatively sluggish.
Despite this, Sainsbury’s appears to offer a relatively sound long-term outlook. It has invested large sums in its online capabilities. This could mean that it is well placed to capitalise on high demand across the grocery, clothing and general merchandise segments online.
Furthermore, the FTSE 100 retailer expects the higher costs it has experienced in recent months to be partially offset by business rates relief. As such, it could offer good value for money after its 12% share price decline in 2020.
FTSE 100 miner Rio Tinto
Another FTSE 100 share that could offer long-term capital growth potential is Rio Tinto (LSE: RIO). The iron ore miner’s recent update highlighted that all of its assets remain operational. And it said demand for iron ore has remained robust across a number of key markets.
Demand has continued to recover in China, while the company reported that the outlook in the rest of the world is more uncertain. As such, weaker commodity prices could be ahead if demand proves to be softer than previously expected.
Rio Tinto also reported that industry supply costs have fallen over recent months. For example, lower energy and freight costs could help to maintain its financial performance over the short run.
In the long term, the company’s sound financial position and its high-quality asset base may mean that it can produce improving returns to investors. Although its share price has bucked the wider FTSE 100 downward trend in 2020 to rise by 12%, it could continue to deliver capital growth as the world economy’s outlook improves. Therefore, now could be the right time to buy a slice of it.
Peter Stephens owns shares of Rio Tinto. 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.