After this year’s market crash, bargain stocks abound. Investing £10k today in FTSE 100 shares could help you make a million in the long run. That’s a very nice sum to have in a tax-shielding Stocks and Shares ISA!
But which UK blue-chips are the best shares to buy right now? Two I really like aren’t only great businesses with excellent long-term growth prospects, but also have potential to spice up nearer-term returns.
A stock that could help you make a million
Not all shares in the FTSE 100 index are household names. For example, relatively few people will have heard of industrial technologies specialist Smiths Group (LSE: SMIN). However, this doesn’t mean it’s a bad investment! Indeed, after this year’s stock market crash, I think SMIN is a FTSE 100 share that could help you make a million in the long run.
It’s a globally diversified business with market-leading positions in a range of industrial areas possessing attractive, long-term growth drivers. This means it could deliver impressive increases in sales and profits in the years and decades to come.
Due to its market-leading positions and flexible business model, its performance has been relatively resilient through the pandemic disruption. Good cash conversion and liquidity are also big positives in negotiating the current challenging environment.
One of the best FTSE 100 shares to buy
Before the onset of the pandemic, Smiths had been preparing to demerge its medical division “in the interests of optimising shareholder value.” The company had previously rejected an offer for the medical business, reportedly in the region of £2.5bn-£2.8bn.
Last year, this division accounted for 23.5% of the group’s operating profit. Its operating margin was 16.8%, a little below the rest of the group’s 17.1%. On the basis of the offer for the medical division, the whole group might be valued at up to £11.9bn (around 3,000p a share). Meanwhile, the shares are trading below 1,500p.
The demerger of the medical business is currently on hold, but could help to optimise value for shareholders sooner rather than later. As such, I’m keen on Smiths, not only for its long-term growth prospects, but also for its potential to spice up nearer-term returns by the demerger.
FTSE 100 shares could help you make a million
There’s a similar story of long-term growth and shorter-term unlocking of value at financial services giant Prudential (LSE:PRU).
The company demerged its UK business (M&G) last year. Yesterday, it confirmed its intention to separate its US business (Jackson National Life). This will leave it focused on high-growth markets in Asia and Africa.
Many investors — including activist shareholder Third Point — argued that separating Jackson and PruAsia could unlock significant value. Indeed, when revealing its hand in February, Third Point reckoned the value could double within three years, if it retained an interest in both businesses.
Prudential shares were trading near 1,500p at the time. Today, you can pick them up below 1,300p. Therefore, I see this as another stock that could deliver impressive returns for buyers today. It’s one of a number of FTSE 100 shares that could help you make a million after this year’s market crash.
The post £10k to invest? I’d buy these 2 FTSE 100 shares in an ISA to make a million appeared first on The Motley Fool UK.
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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended Prudential. 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