This week could be a good time to consider S&P/ASX 200 Index (ASX: XJO) shares.
I think there are two in particular that may be solid options to consider.
Low interest rates has sent the valuations of many businesses higher than normal.
But there are some ASX 200 shares that have been declining that could have good outlooks at the current prices:
Fortescue Metals Group Limited (ASX: FMG)
Fortescue is a very large iron ore miner. Only Rio Tinto Limited (ASX: RIO) and BHP Group Ltd (ASX: BHP) are bigger on the ASX.
It has huge iron ore operations in Western Australia which are only going to get bigger once the Iron Bridge Magnetite Project is completed. This will increase the total production of iron but it will also increase the quality of product being produced by Fortescue.
The Fortescue share price has fallen by 43% since near the end of July. I believe that commodities like iron ore are cyclical. Iron ore has gone through both strength and weakness over the last 15 years. Now that iron is down again, I think this presents a better time to consider iron ore miners. ASX investors are buying share prices, which have fallen a lot.
Another element that I really like about the ASX 200 share is Fortescue Future Industries (FFI). That’s the industrial green business segment.
FFI has a whole heap of different initiatives to try to make Fortescue and the world a greener place. It recently announced it would be building/investing in the world’s largest electrolyser, renewable industry and equipment manufacturing centre at Gladstone in Queensland. This was described as just the first one.
FFI’s goal is to become the world’s leading, fully renewable energy and green products company.
Fortescue is also searching for other resources to diversify as well, which would add another earnings stream.
I think there is a lot to like about this ASX 200 share.
Magellan Financial Group Ltd (ASX: MFG)
Magellan is one of the largest fund managers on the ASX, though GQG could soon be the biggest if it lists in an initial public offering (IPO).
The Magellan share price has fallen by 35% over the last two months.
There are probably a couple of key reasons for that. First, the performance of the main fund has been pretty disappointing compared to the global share market benchmark.
Second, the ASX 200 share has been experiencing fund outflows. That simply means investors are taking their money away from Magellan and giving it to someone else to manage.
But this doesn’t necessarily mean fund outflows are now going to be a permanent feature. If Magellan’s portfolios start performing well again then that could lead to organically growing FUM, stopping outflows and also attracting for inflows again.
I’m also very interested in the idea of its external investments. Instead of investing in other businesses on behalf of investors, Magellan is directly investing in operating businesses like Mexican food chain Guzman y Gomez and investment bank Barrenjoey.
Not only do I think these investments will give Magellan more insights into those industries, but they can really diversify and improve the quality of Magellan’s earnings. Plus, even more investments could turn it into a mini Berkshire Hathaway, with a funds management business on the side.
Summary thoughts on these ASX 200 shares
I think both of these businesses have attractive valuations after their falls.
The huge shift to a green world could be a big boom for Fortescue’s FFI. If Fortescue can be successful here, which I think it might, it could add a lot of value for investors. I’m looking to buy more shares over time.
