1 FTSE 100 stock to buy with £1K

Jabran Khan details a FTSE 100 stock he would add to his portfolio with £1K and hold forever to provide impressive returns!

| 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.

If I had £1,000 to invest in a FTSE 100 stock for my portfolio and hold for a long time, I would pick BAE Systems (LSE:BA). Here’s why.

Defence, security, and aviation

When taking into account geopolitical factors around the world, the business of defence, security, and aerospace is a lucrative space to be in. BAE is one of the world leaders in this sector. Headquartered in the UK, BAE operates across many countries, notably the US, Saudi Arabia, India, and Australia.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

Governments aren’t afraid to spend handsomely on defence and security so it comes as no surprise that the US Department of Defence is one of BAE’s biggest customers. In fact, the firm sells more to the US than to our own Ministry of Defence (MoD).

As I write, shares in BAE are trading for 565p per share. This time last year shares were trading for 431p, which is a 31% return in 12 months. This return is actually more than the 21% the FTSE 100 index has gained in the same period.

The BAE Systems share price has dipped 5% in the past few weeks due to it going ex-dividend. In addition, some investors banked profits due its recent strong showing. This dip could represent a great opportunity for me to pick up shares cheaper than usual.

Why I like BAE

  1. BAE Systems is a key player in its respective industry and I believe this is evident in its mammoth order book and regular new contract wins. It continues to win new contracts on a regular basis worth hundreds of millions of dollars. In fact, it has a multi-billion dollar order backlog that goes all the way through to 2030! In addition to future orders, BAE has a history of mergers and acquisitions to boost its offering and profile. I think this is positive as it shows ambition to grow. This growth could offer me more returns as a potential investor.
  2. My best stocks on the FTSE 100 are consistent performers. This includes historic track records as well as recently too. I do understand that historic performance is not a guarantee of the future but I find it is a useful gauge nevertheless. I can see BAE’s revenue and gross profit have increased year on year for the past three years. BAE’s most recent half-year trading update announced in July was also impressive. My main takeaways were that orders, sales, and free cash flow all increased compared to the same time period last year.
  3. I like stocks that make me a passive income. BAE ticks this box as it has an excellent dividend track record. As I write, its current dividend yield is close to 4.4%, above the FTSE 100 average of 3%.

FTSE 100 stocks have risks

Despite my bullish stance towards BAE, I must note some credible risks. In times of economic uncertainty and austerity, such as now, there could be a cuts to defence budgets. If this were to happen, BAE’s order book and financials could be affected. This could in turn affect my return such as any dividend payments. 

Overall I do believe BAE is one of the best stocks to buy on the FTSE 100 right now. With a spare £1,000, I would happily add BAE shares to my portfolio.

FREE REPORT: Why this £5 stock could be set to surge

Are you on the lookout for UK growth stocks?

If so, get this FREE no-strings report now.

While it’s available: you'll discover what we think is a top growth stock for the decade ahead.

And the performance of this company really is stunning.

In 2019, it returned £150million to shareholders through buybacks and dividends.

We believe its financial position is about as solid as anything we’ve seen.

  • Since 2016, annual revenues increased 31%
  • In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259
  • Operating cash flow is up 47%. (Even its operating margins are rising every year!)

Quite simply, we believe it’s a fantastic Foolish growth pick.

What’s more, it deserves your attention today.

So please don’t wait another moment.

Get the full details on this £5 stock now – while your report is free.

Jabran Khan has no position in any shares mentioned. 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.

 

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 considered, so you should consider taking independent financial advice.

More on Investing Articles

Woman looking at a jar of pennies
Investing Articles

I think the JD Sports share price is a bargain. Here’s why

Our writer explains why the JD Sports share price has led him to buy more for his portfolio.

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

Is this tech stock one of the best shares to buy now?

Jabran Khan is on the hunt for the best shares to buy now for his holdings and takes a closer…

Read more »

Business development to success and FTSE 100 250 350 growth concept.
Investing Articles

3 top FTSE 250 shares to buy right now

I think the FTSE 250 is offering some great dividend and growth shares at the moment. And there are plenty…

Read more »

Happy retired couple on a yacht
Investing Articles

This growth stock has seen its shares pull back! Should I buy now?

When a growth stock sees its share price drop, I look carefully to see if I could pick up a…

Read more »

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

How to identify the best income shares like this one

Income shares vary in quality but this approach keeps me from making some of the worst howlers with dividend investing.

Read more »

Mindful young woman breathing out with closed eyes, calming down in stressful situation, working on computer in modern kitchen.
Investing Articles

If I’d invested £1k in Tesla shares a year ago, here’s how much I’d have now

If Jon Smith had bought Tesla shares a year ago, he'd be in profit. But he has some concerns for…

Read more »

Twenty pound notes in back pocket of jeans
Investing Articles

Should I buy tobacco shares now for big dividends?

After a possible setback for electronic cigarettes, our writer explains why he would still buy tobacco shares for his income…

Read more »

a couple embrace in front of their new home
Investing Articles

3 FTSE shares I’m buying with the Help to Build scheme!

Last week, the government launched a new, Help to Build scheme. So, here are three FTSE shares that could benefit…

Read more »