Crashing UK shares have been a common feature of 2020. Even after a recent rebound, indexes such as the FTSE 100 continue to trade around 20{429fc2506e610357e12b2a5665db82631200a2e00b3a1d8839077d76f18e2e8b} lower than they did at the start of the year.
By contrast, the price of Bitcoin has risen by around 50{429fc2506e610357e12b2a5665db82631200a2e00b3a1d8839077d76f18e2e8b} year-to-date. This could tempt some investors to sell British shares and buy the virtual currency.
However, now could be the right time to buy a diverse range of stocks while they offer wide margins of safety and there is a likely economic recovery ahead.
With that in mind, here are two FTSE 100 stocks that have fallen heavily this year. They could offer long-term recovery potential that improves your prospects of retiring early.
A wide margin of safety among crashing UK shares
Burberry’s (LSE: BRBY) stock price has fallen heavily alongside other UK shares this year. The luxury consumer goods business has recorded a 28{429fc2506e610357e12b2a5665db82631200a2e00b3a1d8839077d76f18e2e8b} decline in its market value, as lockdown measures have caused disruption across its store estate.
In response, it has made changes to its operations expected to produce savings of around £55m. This should help to strengthen its financial position should there be a further slowdown in demand over the coming months.
Burberry’s exposure to Asian economies, such as China and South Korea, could differentiate it from other FTSE 100 companies. The business recently reported encouraging levels of growth across the region that could help to offset weaker performance elsewhere.
Meanwhile, the positive reaction among customers to its new product range and increasing environmental focus suggests that it has a solid long-term outlook. As such, now could be the right time to buy a slice of this high-end fashion house within a portfolio of other UK shares.
Long-term recovery prospects despite a weak near-term outlook
Rolls-Royce (LSE: RR) has experienced a more challenging year than many other UK shares. Its share price has declined by almost 75{429fc2506e610357e12b2a5665db82631200a2e00b3a1d8839077d76f18e2e8b} since the start of 2020. The grounding of aircraft across the globe has led to extremely challenging trading conditions for the business.
In response, it has sought to cut costs and recently announced a rights issue. This should help to stabilise its financial position. However, an increasing debt pile and challenging operating conditions are likely to weigh on investor sentiment.
The company’s long-term outlook could be positively impacted by an economic recovery. Similarly, its defence operations could deliver improving profitability in the coming years.
Clearly, Rolls-Royce shares represent a high-risk investment relative to other UK shares. However, with what appears to be a sound overall strategy to reduce costs and a likely improvement in the economic outlook, they could offer recovery potential in the long run. As such, buying them as part of a diverse portfolio of shares may be a sound move.
More reading
- These stocks have had a bad year to date. Could they be profitable recovery shares?
- Will the Rolls-Royce rights issue secure its future?
- UK shares to buy: why I like the FTSE 100’s Burberry and this British luxury brand owner
- The Rolls-Royce share price is at a 17-year low! Here’s why I’d buy today
- Is it time to double down on the Rolls-Royce share price?
Peter Stephens owns shares of Rolls-Royce. 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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