The stock market crash has caused many FTSE 100 shares to trade on valuations that could make them attractive for long-term investors. Certainly, it may take some time for them to recover due to the weak economic outlook. But the index’s track record of recovery suggests that now could be an opportune moment to buy a range of high-quality businesses.
With that in mind, here are two large-cap shares that have declined heavily so far in 2020. Buying them today could boost your portfolio’s returns, and may even help you to retire early.
FTSE 100 housebuilding business Persimmon (LSE: PSN) has experienced a challenging period, with its construction activities and sales offices being closed for much of the lockdown. As such, its financial performance over the coming months could be disappointing.
Investor sentiment towards the company has, understandably, weakened over the last six months. Since the start of the year, Persimmon’s share price has fallen by 15%. Although further declines cannot be ruled out due to the weak economic outlook, the company’s low share price could suggest that many of the risks it is facing have been priced-in by investors.
With the FTSE 100 business now reopened and it having made progress in strengthening its customer survey results prior to the coronavirus pandemic, it could produce improving financial performance over the long run. Factors such as low interest rates and a low supply of new homes may mean that, over time, Persimmon’s shares deliver a sound recovery. As such, now could be the right time to buy them while they appear to offer a margin of safety.
FTSE 100 retailer Sainsbury’s
Fellow FTSE 100 stock J Sainsbury (LSE: SBRY) has also experienced a difficult six-month period. The lockdown has shifted demand for groceries from stores to online. As a result, the company, along with many of its sector peers, has invested heavily in ramping-up its delivery capabilities.
Although this has caused a rise in its costs, this is set to be largely offset by business rates relief, according to the company’s latest quarterly update. An increasing online presence may help Sainsbury’s to take advantage of ongoing trends towards e-commerce, while its investment in technologies such as self-scanners in its stores could help to reduce its costs and make the business more efficient.
With the FTSE 100 company reporting strong sales growth over the most recent quarter, it could offer a sound growth opportunity in the long run. Although weak consumer sentiment may hold back its share price in the coming months, its online presence and the investment it is making in the digital space could differentiate it from other retail peers. As a result, it could boost your portfolio returns and improve your prospects of retiring early over the long term.
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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