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Forget the National Lottery and NS&I Premium Bonds! I’d buy these 2 FTSE 100 shares today

Peter Stephens
A stock price graph showing growth over time

While the National Lottery and Premium Bonds offer the chance to make a million, the reality is that the FTSE 100 could be a more realistic means of achieving that goal.

The odds of winning the lottery are one in 45m, while the average returns on Premium Bonds are 1.4%. By contrast, the FTSE 100 has delivered an annualised total return of around 9% since its inception in 1984.

As such, buying large-cap shares such as the two companies discussed below could be a worthwhile move for long-term investors who are seeking to improve their financial prospects.

Auto Trader

Despite experiencing uncertain market conditions, digital automotive marketplace Auto Trader (LSE: AUTO) recently reported a rise in revenue of 6% in its half-year results. It has been able to consolidate its dominant market position, with an increasing number of car retailers choosing to use its service instead of those of its rivals.

The company continues to introduce innovative features to its platform to enhance its competitiveness. It also acquired software provider KeeResources in October to improve its range of data.

Looking ahead, Auto Trader is forecast to post a rise in earnings of 12% in the next financial year. Although it trades on a price-to-earnings (P/E) ratio of 24, it could offer long-term growth potential.

Of course, the new and used car markets are likely to experience further uncertainty in the coming months. Consumer confidence may prove to be weak during what is a period of change in a political and economic sense for the UK. But Auto Trader’s market position and its long-term growth potential both mean that it may prove to be a profitable investment.

Glencore

Another FTSE 100 share that could offer capital growth potential is resources company Glencore (LSE: GLEN). But it may also experience difficult operating conditions, with risks such as a global trade war and a slowdown in the eurozone potentially contributing to lower demand for commodities in 2020.

Challenging trading conditions meant that the company reported a decline in its earnings before interest, tax, depreciation and amortisation (EBITDA) of 32% in the first half of its current financial year. This is expected to lead to a 50% drop in its net profit this year, which would clearly be a disappointing result.

Investors seem to be factoring in a difficult period for the business. Glencore trades on a P/E ratio of 18.2 using its current year’s net profit, with this figure falling to 12.2 when next year’s 55% forecast rise in net profit is take into account.

Therefore, long-term investors who are seeking to buy companies that could offer margins of safety and improving financial outlooks could find Glencore appealing. Despite challenges in some of its divisions, such as copper, in the first half of the year, it has the potential to produce improving capital growth in the coming years.

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Peter Stephens has no position in any of the shares mentioned. The Motley Fool UK has recommended Auto Trader. 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.

Motley Fool UK 2019