The BAE Systems share price soared 131%! But here’s what happened when I invested in March

Harvey Jones knew the BAE Systems share price would stop climbing the moment he added the stock to his portfolio. The big question is where it goes next.

| 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.

Frustrated young white male looking disconsolate while sat on his sofa holding a beer

Image source: Getty Images

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.

For years I watched the BAE Systems (LSE: BA) share price climb and climb, wondering whether I’d missed my chance to buy the FTSE 100 defence and aerospace manufacturer.

It’s a common problem with momentum stocks. I’m always worried I’ll buy just as the stock runs out of road. But I decided I’d waited long enough and dived in on 7 March at around £13 a share.

Should you invest £1,000 in Abrdn right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Abrdn made the list?

See the 6 stocks

Unbelievably it carried on climbing so I averaged up on 8 May at around £14 and inevitably that’s when the road ended. Sod’s law strikes again.

Can this FTSE 100 stock continue to fly?

I’m only down a few percentage points so I’ve got little to complain about. The shares were bound to idle after the strong run they’ve had. They’re up 17.94% over 12 months and 131% over five years.

Created with Highcharts 11.4.3BAE Systems PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

I prefer to buy stocks after they’ve fallen out of favour, when they’re cheap and look like a bargain. It’s rare for me to buy a stock trading at 20.44 times earnings, as BAE Systems does today.

I still think it’s a great long-term buy-and-hold though. Sadly, that’s for all the wrong reasons as the world gets more warlike. However, much of that is priced in, with Bank of America recently noting that European defence stocks were trading at a 47% premium relative to the index.

BAE Systems has a price-to-revenue ratio of 1.7, which suggests investors have to pay £1.70 for each £1 of sales. So it looks pricey by that measure too. But then, it usually does. Because it’s a great company.

On 1 August, it posted a 13% rise in sales to £13.4bn, but it wasn’t all good news. Order intake fell from £21.1bn to £15.1bn year on year. That’s still pretty good but a key reason markets love this stock is its huge order backlog, which gives great earnings visibility. Any sign of a slowdown is therefore a worry. The board still expects sales to rise between 12% and 14% this year, beating previous guidance.

No stock rises in a straight line forever. At some point, BAE Systems shares were likely to slow or even fall. But it’s strange to see this happen as war rages in Ukraine, China menaces and the Middle East gets uglier.

Brokers remain optimistic. The 15 analysts offering one-year share price forecasts have produced a medium price of £14.59. If correct, that’s up 13.5% from here. No guarantees though.

I’ll get lots of dividends and growth over time

BAE Systems has a modest trailing yield of 2.33%. However, it has a good record of increasing dividends. Let’s see what the chart says.


Chart by TradingView

As with any stock, there are risks. Peace could break out. Orders could drop as cash-strapped Western governments juggle priorities. Cheap drones are changing the nature of warfare, and big defence will have to adjust.

But human nature suggests to me that BAE Systems will be selling planes, tanks and ships for years to come. I’d be astonished if this didn’t prove one of the most successful stocks in my portfolio in the long run. The near-term is neither here nor there.

I don’t regret buying BAE Systems in March. Its shares rarely trade at a discount. The best time to buy them is whenever I have the cash. And that’s what I did.

Should you buy Abrdn now?

Don’t make any big decisions yet.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.

And he believes they could bring spectacular returns over the next decade.

Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows...

When such enormous changes hit a big industry, informed investors can potentially get rich.

So, with his new report, Mark’s aiming to put more investors in this enviable position.

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

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.

Harvey Jones has positions in BAE Systems. The Motley Fool UK has recommended BAE Systems. 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.

We think earning passive income has never been easier

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

Investing Articles

At a 52-week low but forecast to rise 73%! Is this growth share the FTSE’s top recovery play? 

This FTSE 100 growth share has taken an absolute beating over the past two years but Harvey Jones says the…

Read more »

Investing Articles

This FTSE 250 share offers a juicy 9.8% yield. Will it last?

This well-known FTSE 250 share has a percentage dividend yield approaching double digits. Should Christopher Ruane add the income share…

Read more »

Investing Articles

Is a £333,000 portfolio enough to retire and live off passive income?

A third of a million pounds can generate a serious amount of passive income, but relying on this sum alone…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing For Beginners

Why FTSE 100 investors should pay attention to ‘Liberation Day’

Jon Smith explains why the upcoming tariff announcement from across the pond could have an impact on the FTSE 100,…

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

Here’s why Nvidia stock fell 13% in March

The Nvidia stock price rise was looking unstoppable. Should investors now be wondering if the same might be true of…

Read more »

US Stock

It’s ISA deadline week! Here’s my 3-step game plan

Jon Smith tries to calm the hype around the last minute ISA rush to buy stocks and explains why he's…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

£10,000 invested in BAE Systems shares at Christmas is now worth…

BAE Systems shares have been surging in the FTSE 100 in 2025, driven higher by the wavering US commitment to…

Read more »

Investing Articles

Up 19% in 2 weeks, can the Tesla share price rebound further?

Tesla's first-quarter delivery numbers came out today. Will they help persuade our writer to invest his money at the current…

Read more »