Investing £3,000, or any other amount, in cheap UK shares after the FTSE 100 market crash could be a sound move. It may enable you to obtain low prices for high-quality businesses that lead to impressive returns in the long run.
With that in mind, here are two FTSE 100 shares that seem to offer good value for money after their recent declines. Although they face short-term risks from an uncertain economic outlook, they have the potential to boost your ISA returns due to their long-term recovery potential. As such, now could be the right time to buy them.
An undervalued FTSE 100 stock with recovery potential
Among the biggest-falling UK shares in the FTSE 100 this year has been Rolls-Royce (LSE: RR). Its share price is currently down by 62% since the start of 2020, with lockdown measures causing its financial performance to suffer.
Should you invest £1,000 in Direct Line right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Direct Line made the list?
However, the company is cutting costs as it seeks to become leaner and more efficient. For example, it is on track to reduce expenses by £1bn in 2020. It also expects to report an improving second half of the year, while it is making good progress on fixing its Trent 1000 engines, according to the company’s half-year results.
Clearly, further volatility could be ahead for the Rolls-Royce share price, with upcoming results having the potential to cause investor sentiment to change significantly. However, with solid performance within its defence segment and the potential for improving prospects within the civil aviation industry over the long run, it could offer recovery potential.
A turnaround opportunity within UK shares
Barclays (LSE: BARC) is another FTSE 100 stock that has underperformed many UK shares this year. Its share price is down by 40% in 2020, as low interest rates and a weak economic outlook have weighed on its financial performance.
However, the company’s recent half-year results highlighted that it could offer recovery potential. For example, its tangible net asset value per share currently stands at 284p. This means that it is trading at a 58% discount to its tangible book value, which suggests it offers a wide margin of safety. Furthermore, the company’s balance sheet has improved over recent years, while its diverse range of operations could differentiate it from other FTSE 100 banks.
Certainly, Barclays faces a period of lower profitability due to a challenging outlook for the world economy. But, for long-term investors with a patient approach, its financial position and valuation could make it an attractive turnaround opportunity.
The FTSE 100’s outlook
While the FTSE 100 has rebounded to a large extent following the market crash, UK shares such as Rolls-Royce and Barclays highlight the opportunities still available to investors. Buying them as part of a diverse portfolio could enhance your long-term financial prospects as their operating conditions and share price performances gradually improve.
