Wanted to start a discussion on BAE Systems as its a stock I own but is on my shortlist of potential stocks to transition out of in coming months.
So curious to hear peoples FOR and AGAINST arguments.
FOR
BAE are a defence play (as in military, not defensive stock), so that is unique in my portfolio. Also a UK based defence play which with Brexit could yield some benefits if we have to ramp up spending (as some recently announced).
They also have good sales to other countries military like the US.
Reliable dividend of over 4.5%
Stable company as contracts often many years with govts (who dont go bankrupt generally)
AGAINST
Based historically on previous highs, upside share price growth potential might be 30% (so less then many other options), and this could take years.
US may decrease spending on military under Biden.
After COVID will UK in coming years reign in military spending to pay off debts?
Military and Defence is something I know very little about, so that and some of my recent analysis of other stocks in my portfolio has meant BAE has come under fire from my portfolio trimming.
I remained unsure like yourself on the stock so I trimmed it out and attributed the funds to the BGUK fund as an alternative as I plan to become very passive.
I trimmed BAE for the following reasons:-
-My own ignorance as I had too many companies to track and wasn’t proficient in the sector
-I didn’t see a huge upside potential and if you look at the chart over the last five years it’s not very pretty and very sideways, albeit it’s a healthy dividend
-the current dividend is also at its highest, is this realistically sustainable?
This is one of 25 investments I have. Started investing last year. Makes up 4.5% of my portfolio. Not much movement recently. I’m hoping it will start going up this year. Have probably kept as long as I have and will continue to hold due to dividend. As mentioned not been much movement on it recently.
Held this for a little while myself. Always seemed sluggish. For every reason to hold, I could find 5 reasons to sell. Binned it off for something more interesting.
I am leaning towards this… I think its the fact that I have at least 8-10 high conviction stocks with another 10ish that I like a lot/rebond riskier plays. And BAE right now isnt fitting either, giving it a bit longer as I culled a stock this week already so will consider it and make a change in next few weeks if needed.
What did you swap for? a similar or completely different stock. I think I would be adding to existing stock rather than a new one.
I have BAE as it appears cheap at the mo around 488. Happy to hold for the divi and if it goes up to 550 to 600 during 2021 then may sell. The UK government has said it will spend more on defence, Germany has ordered more Typhoons and they are involved in the F35 program. BABCOCK defence at 199 today so took a small holding here too.
That graph for Babcock is horrendous, and heading towards all time lows. Barely any revenue growth. Losing money. What’s going to change for it to turn around? Thanks
The US under Biden might take a more leadership role in NATO which might result to more spending.
One of Trump’s issues with NATO is that other members are barely spending a considerable percentage of their GDP as such more weight is on US shoulders - Biden will mostly likely see it different.
Also don’t forget Biden’s son served in the military and as such would appreciate the role the military does in keeping the US & it’s strategic partners safe.
My personal view is that there would be more spending on defense under Biden regime.
I’m a beginner and have invested in Babcock.
7 out of 9 stock advisor websites I looked at said these stocks were ones to buy and hold at the moment.
Same concept as the comment above…possible increase of America sales and Britain’s increase in defence budget.
Literally the first shares I have ever bought so if they fail it’s my personal trading trial over too
I have it under my Euro defense manufacturers pie, which did quite well as many of them were related to airplanes and likely suffered more than they should have in early 2020.
I doubt there is much potential for BAE to grow more, but I don’t think US will ever decrease military spending at least not by an amount that is significant. BAE has a sperate board of directors structure for US sensitive projects so at least they won’t be phased out for more American producers.
They’re responsible for upkeep of trident subs and that isn’t going anywhere anytime soon either.
I have BAE Systems in my portfolio and am fairly bullish on them. The order books seem fairly full, so have enough work in the pipeline and whilst the share price is fairly sluggish, the dividend is decent so I am keeping them for that.
Aside from the pro of the full order books, I look at their cybersecurity area as something for growth, plus a lot of their business comes from Saudi etc, so they aren’t just dependent upon the UK and US.
The main cons for me are their pension deficit and the fact that the share price has been sluggish. If they were to ever get in difficulty, I could see a big player like Lockheed Martin or General Dynamics put in a bid.
