Buying crashing UK shares in an ISA may not sound like a sound move to some investors. After all, the weak economic outlook could prolong this year’s market decline.
However, a number of FTSE 100 stocks appear to offer good value for money after their recent declines.
Here are two such businesses that could deliver improving performances and capital returns. Buying them now in a Stocks and Shares ISA could improve your financial prospects.
A recovery opportunity among UK shares
Standard Life Aberdeen (LSE: SLA) could offer recovery potential compared to other crashing UK shares. The investment specialist’s share price is down 30% so far this year. However, it is expected to post a 55% rise in net profit this year, followed by further growth of 17% next year.
This puts the stock on a forward price-to-earnings (P/E) ratio of 14.8, which suggests it offers good value for money. Its recent half-year results highlighted its financial strength, while cost reductions of 11% mean that it is becoming more efficient in response to uncertain trading conditions.
Although a weak global economic outlook could hold back its prospects, it may benefit from a likely long-term recovery in world GDP growth. Therefore, it could be worth buying Standard Life Aberdeen while it seems to offer a wide margin of safety.
An undervalued FTSE 100 stock with growth potential
Smith & Nephew (LSE: SN) has also underperformed many UK shares this year. Its stock price is currently down by 15% in 2020, with disruption in its key markets holding back its financial performance. For example, its revenue in the second quarter declined by almost 30%.
Looking ahead, the company is forecast to post improving financial performance as its markets reopen following the pandemic. In the next financial year it is expected to deliver a 55% rise in net profit. This puts its shares on a price-to-earnings growth (PEG) ratio of just 0.4, which suggests they offer good value for money.
Clearly, further disruption to Smith & Nephew’s operations is likely to mean share price falls. However, for long-term investors, now could be the right time to buy what is a high-quality business trading at a low price due to challenges that are likely to be temporary in nature.
Buying crashing shares in an ISA
Clearly, buying crashing UK shares such as Smith & Nephew and Standard Life Aberdeen may be a tough task for any investor to undertake at the present time. There is an uncertain economic outlook that could send their shares lower over the coming months.
However, buying strong businesses at low prices could be a means of improving your ISA returns. It may allow you to benefit from a long-term recovery as investor sentiment and the performance of the world economy gradually improve in the coming years.