Why Negative News Flow Makes Me Want To Buy BAE Systems plc

Peter Stephens is keener than ever to buy shares in BAE Systems plc (LON: BA).

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

I like to buy stocks whose news flow is negative. This may, at first, sound rather Foolish but, if you think about it, everyone wants to buy shares when they are low in price and sell when they are high in price.

For shares to be low, there has to be some bad news kicking around: things have to look bleak. Similarly, for shares to move higher, there needs to be some good news, or else why would they be high?

So, the fact that news flow from BAE Systems (LSE: BA) (NASDAQOTH: BAESY.US) continues to be negative does not put me off at all. In fact, it makes me want to buy shares in the company!

Indeed, recent news has continued to be negative as it involves a blocked investigation into BAE’s arms deal with Saudi Arabia. Recent news on the topic includes the loss of a highly sensitive cache of documents by the Serious Fraud Office (SFO), which was conducting the investigation.

The SFO has admitted to “accidental data loss of 32,000 document pages and 81 audio tapes and electronic media“. The loss has sparked two separate reviews at the agency.

Obviously, such news is not good in the short term for BAE’s share price. However, for long-term investors such as me it presents an opportunity.

BAE currently trades on a price to earnings (P/E) ratio of just 11.5, which compares very favourably to the FTSE 100 on 15.2 and BAE’s industrials industry group on 23. Furthermore, the shares yield an impressive 4.4%, with earnings per share forecast to grow at a modest 3.5% per year over the next two years.

Of course, you may be looking for more than just one buying idea at the moment. If you are then I recommend you take a look at an exclusive report entitled 5 Shares To Retire On.

The shares reviewed all offer dependable dividends and sound growth prospects. Better yet, the report is completely free to view by clicking here.

> Peter owns shares in BAE Systems.

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.

More on Investing Articles

A pastel colored growing graph with rising rocket.
Investing Articles

2 FTSE stocks that demonstrate the best (and worst) of the AIM market

Our writer looks at the performance of two very different FTSE stocks that highlights the pros and cons of investing…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

With a P/E ratio of 8 and selling for pennies, is this FTSE 250 share a bargain?

Christopher Ruane digs into a cheap-looking FTSE 250 share that sells an iconic product and considers whether it's really a…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

Could the stock market crash in 2025?

Our writer considers some possible drivers for a stock market crash. Rather than try to time it, he's wondering how…

Read more »

Investing Articles

Why do so few people build a passive income?

For those putting a little money away, far more choose savings accounts over aiming to make a passive income from…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

Could putting £20,000 into FTSE 100 stocks get me monthly passive income of £2,756?

The FTSE 100 is full of dividend shares offering generous returns. Our writer considers how much income he could generate…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing For Beginners

At fresh 52-week lows, is this the best value stock in the FTSE 250?

Jon Smith considers a value stock that's currently at low levels due to recent news, but he feels it shouldn't…

Read more »

Investing Articles

The Burberry share price rises on takeover rumours. But I still don’t want to buy

Speculation about a possible takeover sent the Burberry share price higher. However, our writer’s steering clear of the luxury fashion…

Read more »

Businesswoman calculating finances in an office
Investing Articles

With the rise in Barclays’ share price, £2k invested 5 years ago is worth this much

City analysts predict robust earnings increases ahead for Barclays, so can the upwards momentum of the share price continue?

Read more »