I bought these 2 FTSE 100 shares two years ago. Should I now add to them?

Andrew Woods asks if he should add to his current holding in these two FTSE 100 shares ahead of a potential recovery.

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I bought two FTSE 100 shares, Rolls-Royce (LSE:RR) and International Consolidated Airlines Group (LSE:IAG) during the pandemic. I viewed them, and still do, as good recovery plays. With an unpredictable future, should I add to these positions to lower my average weighted price?

Rolls-Royce

Rolls-Royce endured a torrid time during the pandemic. This was primarily because the engine-maker relied on its customers’ aircraft flying to derive income. 

With most aircraft grounded in line with restrictions, revenue began to slide significantly. Unsurprisingly, the shares plunged. In the past year they are down 25% and have fallen 31% in just the past six months. They currently trade at 81p.

In the first quarter of 2022, however, the firm reported that civil aerospace flying hours were up 42%, year on year. This was good news, because Rolls-Royce is paid by the flying hour by airlines using its engines.

Furthermore, the business continues to work on long-term contracts within its defence segments, working with air forces around the world.

It’s also working to make nuclear power a more viable option through its Small Modular Reactors (SMRs). These have received significant investment but could take a while to become profitable. 

In addition, inflation and supply chain issues with raw materials, like titanium, could halt Rolls-Royce’s recovery. 

Nevertheless, I consider this a good recovery stock and one that may continue to make progress as international restrictions ease.

IAG

IAG suffered in a similar way to Rolls-Royce throughout the pandemic. In the past year, the share price has plummeted 41%, and by 19% in the past six months. It currently trades at 114p.

For 2020, the airline conglomerate reported a pre-tax loss of €7.8bn and it was forced to initiate a share issue to raise new funds. I took up the offer to buy new shares so that I didn’t get diluted.

By 2021, pre-tax losses had halved to €3.5bn. This was an early indication that the travel sector was beginning to recover. 

Now, for the first quarter of 2021, passenger capacity hit 65% of 2019 levels and the business expects to see this number increase to 80% for the rest of 2022.

Also in that quarter, pre-tax losses were €731m, down from over €1bn a year earlier.

Going forward, however, there’s a risk posed by higher jet fuel prices due to surging oil prices. 

Furthermore, IAG is struggling to meet demand for flights as it scrambles to recruit new cabin crew. It has even promised a £1,000 sign-on bonus for new employees.

If the firm has been able recruit in time, the next set of quarterly results (for the three months to 30 June) could show early signs of further improvement.

Overall, the performance of these two stocks since I purchased them has been mediocre. The outlook is still uncertain, but I’m going to add to my holdings at these low levels soon, because I believe in them for the long term.  

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

Andrew Woods owns shares in International Consolidated Airlines Group and Rolls-Royce. The Motley Fool UK has no position in any of the shares mentioned. 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.

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