2 FTSE 100 shares primed for long-term gains

Andrew Woods explains how broader economic factors make these two FTSE 100 shares attractive as potential investments for his portfolio.

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The stock market has been volatile over the past few years. The pandemic, war in Ukraine, and threat of recession have made share prices choppy. Nevertheless, I think I’ve found two FTSE 100 stocks that could be well-positioned to see their shares climb over the long term. Let’s take a closer look.

Higher interest rates

First, banking giant HSBC (LSE:HSBA) has seen its shares climb 5% in the last three months. At the time of writing, they’re trading at 535p.

The firm has been benefiting from a climate of rising interest rates. With inflation exceeding 10%, central banks have been increasing rates in order to bring it under control. 

Interest rates are currently set at 1.75% in the UK. They generally determine how much banks can charge for borrowing services and how much customers will earn for depositing cash in savings accounts. 

Higher rates are generally good news for banks like HSBC, because they may be able to charge more when providing loans and mortgages. 

However, more expensive borrowing may deter customers from taking on any more debt, as they may also be finding difficulties dealing with other issues, like the energy crisis. 

Despite this, investment bank Berenberg increased its price target for HSBC from 560p to 625p, citing improvements in both revenue and costs during the three months to 30 June.

It’s also in a good state of financial health, with a cash balance of $1.09trn, and total debt of $615.84bn. 

Surging energy costs

Second, mining firm Glencore’s (LSE:GLEN) share price has fallen 15% in the past three months. It currently trades at 472p.

It posted bumper pre-tax profits of $7.3bn in 2021, mainly because of higher commodity prices and increased demand for coal and liquified natural gas (LNG).

Furthermore, for the six months to 30 June, adjusted core earnings amounted to $18.9bn, up 119% year on year. 

The business is also embarking on a $3bn share buyback scheme, together with a special distribution of $1.45bn. Although I would be buying the shares in Glencore for growth, it’s good to know that I could also derive income from my investment.

However, there are threats on the horizon. Cost and wage inflation is starting to eat into balance sheets. This may only get worse before it gets better. Commodity prices, especially in base metals, are also much lower than last year.

Despite this, there’s still heightened demand for coal and LNG, products that many of Glencore’s competitors previously decided to move away from.

Overall, both of these firms present interesting opportunities for growth over the long term. While both face threats, like inflation, they are also in strong financial positions. As such, I’ll be adding these businesses to my portfolio in the near future. 

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 assessed. Consider taking independent financial advice.

Andrew Woods has no position in any of the shares mentioned. The Motley Fool UK has recommended HSBC Holdings. 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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