Buying UK shares after the recent stock market crash may not seem to be a sound strategy for anyone seeking to make a million. After all, indexes such as the FTSE 100 and FTSE 250 continue to face uncertain futures due to risks such as a second wave of coronavirus and Brexit.
However, a number of stocks appear to offer wide margins of safety and sound strategies that could lead to long-term growth. Here are two such businesses that could be worth buying in an ISA today, and holding over the coming years.
BP: undervalued among UK shares?
While many UK shares have fallen heavily in 2020, BP’s (LSE: BP) share price fall of 40% is relatively higher. The FTSE 100 stock has faced challenging trading conditions due to reduced demand for its products. This has led to a recently-announced major cost-cutting programme, as well as asset impairments.
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The company will also pivot towards renewable energy over the coming years, since it feels coronavirus could hasten the switch towards greener forms of energy. This could mean it gradually shifts its focus towards lower carbon assets that are likely to provide a more sustainable growth outlook than fossil fuels. The end result could be a more resilient business that is able to produce more reliable profit growth in the long run.
Clearly, the process of changing BP into a leaner and greener company could be a challenging one. However, trading at a relatively low level compared to other UK shares, investors appear to have factored in a period of difficulty. As such, now could be the right time to buy the stock while it appears to offer a wide margin of safety.
British American Tobacco: a long-term income opportunity?
Another stock that I think could be worth buying in a portfolio of UK shares is British American Tobacco (LSE: BATS). Its recent update highlighted its operational strength in developed markets, where strong price growth is helping to compensate for lower volumes.
Even though the company’s performance in emerging markets has been less robust, it has maintained its dividend payout ratio of 65%. This means the stock has a dividend yield of 7.5%. This could grow at an above-inflation pace, due to the resilient prospects for the business in key markets such as the US.
At a time when the income investing prospects for many UK shares are somewhat challenging to say the least, British American Tobacco could stand out as a reliable means of obtaining a rising dividend. It has a defensive business model and long-term growth potential in next-generation products, such as e-cigarettes. And I think it could offer an attractive risk/reward opportunity. That could help to improve your chances of making a million in the coming years.
