The FTSE 100 may have experienced a bull market for over a decade, but a number of its members continue to offer good value for money.
Buying such companies while they trade at wide discounts to their intrinsic values has historically proven to be an effective investment strategy. It could help you to grow your retirement portfolio from a standing start at age 40.
With that in mind, here are two FTSE 100 shares that could be worth buying today due to their low valuations and long-term growth potential.
Recent trading updates from FTSE 100 housebuilder Persimmon (LSE: PSN) have highlighted the progress it is making in improving its customer care metrics. It is seeking to put customer satisfaction levels ahead of volume growth, which resulted in a 4% drop in completions in 2019.
However, it is also leading to improved customer feedback. Persimmon reported in January that its Home Builders Federation (HBF) customer satisfaction rating is trending above four stars. This would represent an improvement on its previous three-star rating, which was behind most of its major peers.
Looking ahead, the company is expected to report a 1% rise in net profit this year, and a 2% gain in earnings next year. These figures may be better than they first appear, since the company is set to grow profitability despite focusing its efforts on customer care.
In the long run, a low-interest-rate environment and a stronger reputation could make the company’s homes more attractive to potential buyers. Its price-to-earnings (P/E) ratio of 11.8 indicates that it offers a wide margin of safety and could offer capital growth potential as it implements its revised strategy over the coming years.
Another FTSE 100 share that seems to offer good value for money at the present time is gold-miner Polymetal (LSE: POLY). It has benefitted from gold’s surge over the past couple of years, with the precious metal gaining over 15% in 2019 and adding a further 4% to that figure in January 2020.
Risks such as political uncertainty in the US and Europe, as well as the coronavirus, could increase investor demand for defensive assets such as gold. The precious metal also seems likely to benefit from modest inflation levels in the US, which could lead to a continuation of its loose monetary policy.
Polymetal is forecast to post a rise in its bottom line of 31% in the current year. Despite this, it trades on a price-to-earnings growth (PEG) ratio of just 0.4, which suggests that it offers good value for money.
Although the gold price could come under pressure if the global economy’s outlook improves and investor sentiment picks up, Polymetal’s wide margin of safety suggests that it is undervalued at the present time. As such, now could be the right time to buy a slice of it for the long run.
The post No savings at 40? I’d buy these 2 cheap FTSE 100 stocks to retire early appeared first on The Motley Fool UK.
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Peter Stephens owns shares of Persimmon. 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.
Motley Fool UK 2020