If I had a spare £500 to invest, I’d buy these 3 FTSE 100 shares

Yasmin Rufo offers her thoughts on three FTSE 100 companies that she’d invest in right now that should provide long-term gains

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It’s not an easy time to be an investor right now. As threats of recession loom, the war in Ukraine continues and energy prices rise, it can be difficult to know what stocks to buy. I’ve found three FTSE 100 shares that are worth holding in my portfolio for the long run. Let’s take a look at them.  

Travel

During the pandemic, all stocks related to travel took a massive hit as demand plummeted. Yet, most travel companies and airlines have recovered well, and that’s particularly the case for British Airways owner IAG (LSE:IAG).

The company’s recent H1 results were particularly positive. Notable successes included Q2 being the first profitable quarter since the beginning of the pandemic. IAG also reduced its debt and is expecting a 78% capacity compared to 2019 levels.

Of course, there are still challenging times ahead as the company must compete with low-cost airlines such as Ryanair and easyJet. The share price has somewhat recovered from its lows in October 2020, but it’s still lower than its pre-pandemic trading levels.

Nonetheless, as business and personal travel continues to rise, I think IAG has a lot of potential to provide long-term gains.

Banking

Inflation in the UK is currently over 10%, which is a 40-year high for the country. With rising inflation comes an increase in interest rates from banks, and the rate is set at 1.75% right now.

A rise in interest rates is particularly beneficial for banking sector stocks, as the likes of Barclays (LSE:BARC) can charge more for products such as mortgages and loans.

Certainly, there’s a level at which high rates deter people from borrowing as they don’t have the ability to pay it back. If interest rates reach considerably higher levels, banks may start to see a reduction in customers, but I believe we are still a way off from that.

Barclay’s share price is up over 11% in the past six months and is still the cheapest bank on the FTSE 100. The company has a P/E ratio of five, compared to competitors such as HSBC that has a 9.13 P/E ratio.

Telecommunications

A stock that offers both a decent chance of performing well and has an impressive dividend yield is Vodafone (LSE:VOD).

During recessions, telecom stocks tend to remain stable and can withstand external pressures. The company also has an impressive dividend yield of 5.9% for this year, which is far higher than the FTSE 100 average of 4%. Vodafone has also set its 2024 yield to 6%.

Although the share price has been pretty flat recently, only down 2.41% year to date, I think this could change soon thanks to increasing roll-out of 5G and broadband. However, it is important to note that telecom companies like Vodafone require extremely large amounts of capital to grow and invest in new technologies, so this may dampen the company’s performance in the short term.

On the whole, analysts seem positive about the stock — there’s a consensus Buy rating, and Morgan Stanley analysts believe the shares could reach 180p. That represents a 60% upside.

Overall, if I had a spare £500 I would split my money across IAG, Barclays and Vodafone, as I believe all will pay off in 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 assessed. Consider taking independent financial advice.

Yasmin Rufo has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays, HSBC Holdings, and Vodafone. 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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