The Motley Fool

Could these 2 cheap FTSE 100 shares help ISA investors get rich or cost them a fortune?

Image source: Getty Images

The FTSE 100 continues to struggle for traction following the 2020 stock market crash. Britain’s premier share index has struggled to build on its initial bounce and as a result, lots of UK shares appear too cheap to miss. But how do I sort the duds from the share market superstars?

A risk too far?

Lloyds Banking Group (LSE: LLOY) shares look mighty cheap based on broker forecasts for 2021. The blue-chip bank is expected to see annual earnings rebound more than 200% next year. And this leaves it trading on a rock-bottom forward price-to-earnings (P/E) ratio of 8 times. I won’t be buying this FTSE 100 firm any time soon, though.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

It’s not just the risks of a prolonged Covid-19 economic hangover that threatens Lloyds’ bottom line, although this is a significant consideration (the UK has been one of the worst-performing major economies since the coronavirus outbreak). And it’s not just because the threat of a no-deal Brexit is rising, a development that would probably create huge problems for the economy for much longer than Covid-19 likely will.

It’s that the Bank of England remains hell bent on maintaining low interest rates for a prolonged period of time. To illustrate the point, just this week bank chief Andrew Bailey signalled that he’s prepared to drop the bank’s 2% inflation target. This signals that Threadneedle Street is looking to keep interest rates lower for longer and puts another question mark over Lloyds and its profits outlook.

A better FTSE 100 share

These comments by Mr Bailey mirror similar sentiments to the US Federal Reserve in recent months. Back in August, Jerome Powell, head of the central bank said that he was also considering changing the body’s inflation goal. Interest rates Stateside are, as in the UK, also rattling around record lows.

Bad for savers and bad for banks like Lloyds. But further good news for companies that make money from assets that thrive in such an environment. We’re talking about precious metals producers like Fresnillo (LSE: FRES) of the FTSE 100, for example. When fears over the legitimacy of paper currencies rise, investors pile headfirst into hard currencies like gold and silver.

No wonder City analysts expect Fresnillo’s yearly earnings to more than double in 2021. Though inflationary concerns aren’t the only reasons why the Footsie share’s profits appear on course to fly. The threat of Covid-19 raging long into next year, and a failure to produce a vaccine soon (if at all), should keep safe-haven demand for Fresnillo’s metal heading northwards.

All these reasons explain why plenty of analysts are bullish on the gold and silver price. The prices might have stepped back recently, but this is on the back of solid profit booking following 2020’s mighty gains. I fully expect precious metal prices to rocket again. And I reckon FTSE 100-quoted Fresnillo is a great way to play this theme.

A Top Share with Enormous Growth Potential

Savvy investors like you won’t want to miss out on this timely opportunity…

Here’s your chance to discover exactly what has got our Motley Fool UK analyst all fired up about this ‘pure-play’ online business (yes, despite the pandemic!).

Not only does this company enjoy a dominant market-leading position…

But its capital-light, highly scalable business model has previously helped it deliver consistently high sales, astounding near-70% margins, and rising shareholder returns … in fact, in 2019 it returned a whopping £150m+ to shareholders in dividends and buybacks!

And here’s the really exciting part…

While COVID-19 may have thrown the company a curveball, management have acted swiftly to ensure this business is as well placed as it can be to ride out the current period of uncertainty… in fact, our analyst believes it should come roaring back to life, just as soon as normal economic activity resumes.

That’s why we think now could be the perfect time for you to start building your own stake in this exceptional business – especially given the shares look to be trading on a fairly undemanding valuation for the year to March 2021.

Click here to claim your copy of this special report now — and we’ll tell you the name of this Top Growth Share… free of charge!

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Fresnillo and Lloyds Banking Group. 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.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.