The FTSE 100 has hit a six-week low, according to the headlines. But on the upside, that means FTSE 100 shares are higher than they were seven weeks ago! The stock market looks pretty robust to me in the face of soaring prices and rising interest rates.
I think any time is a good time to start buying FTSE 100 shares. But I do see some cracking buys at the moment. Starting today, which would be my first three FTSE 100 buys?
Bank
Without hesitation, my first buy would be Lloyds Banking Group (LSE: LLOY). Now, I have to start with a caution. I first bought some Lloyds shares a few years ago, and the price is still way below what I paid.
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But (and the reason I’m holding and might buy more) I’ve been enjoying a steady income stream. Forecasts put the dividend at around 5.5% this year, and it would be strongly covered by earnings.
Lloyds faces a conflict between the benefits of higher interest rates on its lending, and fewer individuals and companies borrowing money during the squeeze.
But the bank has sufficient spare capital to be buying back its own shares now. Based on that, I think Lloyds is likely to maintain its dividend.
High street
My second pick has first-half results scheduled for 29 September, in what is likely to be a tough year. It’s fashion retailer Next (LSE: NXT), and I rate it for long-term recovery potential.
The Next share price has fallen over the past 12 months. But it’s up 38% over five years, which I see as an impressive performance.
The forecast dividends aren’t sparkling, with an expected yield of around 3.5%. And forecast price-to-earnings (P/E) multiples of around 10 aren’t the lowest around.
Times are tough in the sector. But I think that gives me an opportunity to buy the best in the business at a reasonable price. Billionaire investor Warren Buffett did, after all, famously suggest: “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
Mining
I’m tempted to buy Rio Tinto (LSE: RIO) shares too after the recent price slump. The negativity comes as the mining giant has cut its interim dividend.
The forecast yield had been getting very high. But this is a cyclical business, and we should expect dividends to rise and fall as demand and commodities prices go up and down. This time, a squeeze in Chinese demand due to that country’s zero-Covid policy seems to be the trigger.
But Rio did point out that its reduced 2022 first-half payout was still its “second highest ever interim dividend“.
The Rio Tinto share price is another that’s had a tough year, but it had a good five years. This time we’re looking at a five-year gain of 24%.
Risk
Anyone thinking of buying these needs to do their own research, as I’m only scratching the surface. And I could see all three facing a volatile year or more.
But at today’s valuations, they’re all on my FTSE 100 shares shortlist.
