While some UK shares have rallied after the market crash, many others continue to trade at appealing price levels.
As such, they could prove to be more attractive investments over the long run than gold or Bitcoin. After all, the track record of indexes such as the FTSE 100 and FTSE 250 show that they have always recovered from their downturns to produce new record highs.
With that in mind, here are two FTSE 100 stocks that appear to offer wide margins of safety. Buying them now could improve your financial outlook and even help you to retire early.
BAE: attractive long-term opportunity among UK shares
As with many UK shares, BAE’s (LSE: BA) stock price continues to trade lower than it did at the start of the year. It is currently down 10% year-to-date, which suggests that it could offer a margin of safety as investors factor in an uncertain economic environment.
The company’s recent results showed that it has delivered a resilient performance in the first half of the year. It reported strong demand for its products, and it expects to experience an improving performance in the second half of the year across many of its key markets.
BAE has also resumed dividend payments at a time when many other UK shares have cancelled or delayed their shareholder payouts. It currently yields around 4.5%, which could increase its appeal among income-seeking investors in an era when interest rates are expected to remain at low levels for a sustained period of time. Therefore, buying it now could deliver impressive total returns in the coming years as the world economy recovers from the impact of the pandemic.
Imperial Brands: recovery potential after challenging period
Imperial Brands (LSE: IMB) is another business that could offer recovery potential as the prospects for UK shares improve. The tobacco company’s shares are currently trading a third lower than they were at the start of the year, with disappointing recent financial performance contributing to weaker investor sentiment.
Looking ahead, Imperial Brands is likely to implement a refreshed strategy in the coming months. It has a new management team that could refocus its capital on long-term growth opportunities. This could help to improve investor sentiment and to deliver stronger financial performance at a time of major change for the tobacco industry. It has also recently sold its cigars business for a total of €1.2bn, which could allow it to invest in more attractive growth opportunities elsewhere.
Although its short-term prospects may be disrupted by the impact of the coronavirus on travel retail demand, Imperial Brands appears to offer a wide margin of safety and turnaround potential relative to other UK shares. Therefore, it could be worth buying today as part of a diverse portfolio of stocks.
Peter Stephens owns shares of BAE Systems and Imperial Brands. The Motley Fool UK has recommended Imperial Brands. 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.