The stock market crash has prompted some investors to avoid buying cheap UK shares. That’s understandable. They face challenging operating conditions at the present time in many cases. And that could lead to disappointing share price performances over the coming months.
However, long-term investors who can build a diverse portfolio of stocks could benefit from buying undervalued British shares after the recent market downturn. In time, they may produce sound recoveries that improve your financial prospects.
With that in mind, here are two FTSE 100 stocks that appear to be undervalued. They could be worth buying today, and may even boost your retirement prospects.
Glencore (LSE: GLEN) could offer good value for money relative to other cheap UK shares. The FTSE 100 mining business has experienced a tough period due to coronavirus. But its assets have largely been able to remain operational throughout the year.
In fact, its marketing division produced a record half-yearly profit that strengthened the company’s overall performance. It could remain a key differentiator for Glencore versus sector peers, since it offers counter-cyclical earnings potential.
Looking ahead, the company is forecast to return to positive earnings growth next year after a challenging 2020. This should aid it in seeking to reduce debt to more manageable levels. Meanwhile, its forward price-to-earnings (P/E) ratio of 12.5 suggests that investors may have factored in further disruption for the wider sector.
Clearly, a weak economic outlook is likely to cause investor sentiment towards commodity businesses to remain subdued in the short run. However, Glencore’s share price could offer recovery potential over the long run as part of a diverse portfolio of cheap UK shares.
A long-term recovery opportunity
Whitbread (LSE: WTB) is another FTSE 100 stock that could be worth buying as part of a portfolio of cheap UK shares. The hotel operator’s shares are down 45% this year as lockdown measures have severely disrupted its financial performance.
However, the business recently reported that its sales performance has been ahead of the wider market since reopening started. The company has also reduced its costs, cut back on its capital expenditure and suspended dividends to preserve cash alongside a £1bn rights issue. This suggests that it has the financial means to overcome short-term risks and to benefit from a likely long-term economic recovery.
Clearly, Whitbread’s share price could come under further pressure in the short run, depending on how the coronavirus pandemic progresses. However, with a strong Premier Inn brand and a lower share price that could factor-in many of the risks faced by the company, the business could offer recovery potential. As such, for long-term investors with a diverse portfolio of cheap UK shares, it could be worth buying today.
A Top Share with Enormous Growth Potential
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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.
Peter Stephens owns shares of Whitbread. 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.
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