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These FTSE 100 stocks have dived in the last year. I’d buy these cheap shares now

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A number of FTSE 100 stocks continue to trade at low price levels following a challenging year for the stock market. Their short-term prospects may continue to be difficult due to disruption caused by coronavirus. However, they could deliver impressive recoveries in some cases over the coming years.

As such, now may be the right time to buy a selection of cheap shares and hold them for the long run. Through building a diverse portfolio of stocks, it’s possible to limit overall risk and enjoy higher potential rewards in a likely stock market recovery.

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Buying cheap FTSE 100 stocks for the long run

In the last year, FTSE 100 stocks such as Burberry have experienced hugely difficult operating conditions. The luxury goods business has been forced to close many of its stores due to lockdown measures. This has prompted a 20% fall in its shares in the last year.

However, it’s seeking to adapt to this situation through ramping-up its online business. This may improve its competitive position in the long run, as consumers increasingly move online to purchase goods. Burberry has also received positive feedback from customers regarding its new designs. It’s also been focusing on becoming more efficient, which may lead to a leaner business that’s more adaptable to changing consumer tastes.

A resilient operating outlook

Other FTSE 100 stocks such as Taylor Wimpey have experienced resilient demand for their goods and services despite coronavirus disruption. The company recently reported a robust level of demand among homebuyers, which suggests that low interest rates have the potential to encourage a larger number of first-time buyers.

After a 20% decline in its share price over one year, Taylor Wimpey now has a forward price-to-earnings (P/E) ratio of around 11. This could include a margin of safety. Certainly if the outlook for the UK economy improves through the course of 2021. With a growing land bank and large cash balance, the stock seems to be well-placed for a recovery.

A challenging future that offers turnaround potential

Rolls-Royce has been one of the largest fallers among FTSE 100 stocks. In the last year, its share price has declined by over 50% because of grounded flights across the civil aerospace sector. This situation could remain in place for much of 2021. However, investors could look ahead to the return of fewer travel restrictions before they come into place.

The business has strengthened its capital position through an equity placing. It’s also been looking to cut costs through measures such as headcount reduction. In the long run, this could create a more streamlined business. Consequently, this should help place the business in a good position to benefit from a likely return to normality in the civil aviation industry.

As such, while it remains an unpopular stock, there may be turnaround potential on offer.

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.

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Peter Stephens owns shares of Rolls-Royce and Taylor Wimpey. The Motley Fool UK has recommended Burberry. 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.

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