The performances of many UK shares have been disappointing in 2020. Risks including coronavirus and Brexit have weighed on investor sentiment. This has sent many stocks to their lowest levels for a number of years.
However, their falls could present buying opportunities for long-term investors. The recovery prospects for the economy and stock market mean that buying cheap shares today may prove to be a profitable move.
With that in mind, here are two FTSE 100 shares that have fallen 25%+ in 2020. They may now offer margins of safety that produce long-term investment gains.
A large decline relative to other UK shares
WPP’s (LSE: WPP) 38% fall since the start of the year means it has underperformed many UK shares. The advertising and branding business has experienced falling revenues as the world economy’s outlook has deteriorated.
However, its recent interim results showed that it is making progress in improving its long-term prospects. For example, it has continued to make cost savings and has further shifted its focus towards online opportunities. This could mean that it is in a good position to respond to a quickening in the move to e-commerce that is currently taking place among consumers.
Looking ahead, WPP is expected to outperform the financial performances of many UK shares next year. Its bottom line is expected to rise by around 30%. This puts it on a forward price-to-earnings (P/E) ratio of 9.2. Although its forecasts are likely to change depending on the economy’s outlook, it seems to offer good value for money after its share price decline. As such, now could be the right time to buy a slice of it for the long run.
An undervalued FTSE 100 stock
Standard Life Aberdeen (LSE: SLA) has also delivered a disappointing performance compared to other UK shares. Its share price is currently down 25% since the start of the year, with an uncertain global economic environment weighing on investor sentiment.
The company’s recent half-year results showed that it is making progress in implementing its strategy. For example, it was able to reduce adjusted operating expenses by 11% through a range of efficiency measures. It also delivered strong investment performance, with 68% of its assets under management outperforming their benchmarks.
Looking ahead, Standard Life Aberdeen is forecast to deliver a 17% growth in net profit next year after a challenging current year. This puts it on a forward P/E ratio of around 15.8, and suggests that it offers good value for money relative to other UK shares.
The potential for a global economic turnaround could lift asset prices, which would be likely to have a positive impact on the company’s financial performance. As such, now could be the right time to buy a slice of it for the long run after its recent decline.
Peter Stephens owns shares of Standard Life Aberdeen 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.