I think the best stocks to buy now in the FTSE 100 are recovery shares. However, rather than just picking out one or two blue-chip stocks for my recovery portfolio, I’d buy a basket of different companies.
I think this would allow me to gain exposure to the recovery while limiting risk at the same time. After all, there’s always a chance one or two businesses may never recover from the pandemic.
With this in mind, here’s a selection of FTSE 100 stocks I’d buy for my portfolio as recovery investments today.
Stocks to buy now
Two sectors that have suffered more than most in the pandemic are hospitality and commercial property. As such, I’d acquire the world’s largest catering group Compass and real estate investment trust British Land for my portfolio of FTSE 100 recovery shares.
Both of these stocks offer something different. As large hospitality events have been put on ice during the past 18 months, Compass’ sales plunged. To overcome these challenges, the firm has been branching out into new markets.
And as the economy reopens, large events are also returning. This could provide a twin tailwind for the firm as its news lines of business and more traditional income streams from significant events combine to push sales higher.
Meanwhile, figures show consumers are steadily returning to bricks-and-mortar stores. This is positive for British Land. The landlord owns a vast commercial property portfolio, with both offices and retail units making up the mix.
Over the past year, management has also diversified by expanding into retail parks, which achieved better performances throughout the pandemic. Once again, the company could benefit from twin tailwinds as the economy reopens, with its traditional and new portfolios both reporting growth.
FTSE 100 engineering
As well as the companies outlined above, I think BAE Systems and Melrose are also some of the best FTSE 100 stocks to buy now.
I’d acquire both of these companies because I believe they offer exposure to different parts of the global engineering and manufacturing industries. Melrose is primarily a civilian engineer, while BAE is a defence contractor.
Defence contracting can be a lucrative and predictable business because deals usually last for many years, and technology is closely guarded. Melrose doesn’t have the same defensive qualities, but it does have a strong track record of achieving value for shareholders by improving the efficiency of the companies it acquires.
I think both of these enterprises should benefit from the FTSE 100 economic recovery as we advance.
Risks and challenges
These may be some of my best stocks to buy now. Nevertheless, I think it’s important to note they’re not risk-free investments.
As recovery plays, if the rebound starts to stutter, or if there’s another more severe wave of coronavirus, they could begin to struggle.
Rising costs could also be a problem for the engineers, manufacturers and caterers. At the same time, higher interest rates may reduce property profit margins. So I’ll be keeping these risks in mind when I buy these stocks.
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Rupert Hargreaves owns shares of British Land Co. The Motley Fool UK has recommended British Land Co, Compass Group, and Melrose. 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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