ISA holders lucky enough to have a bit of spare cash available have until 5 April to take advantage of the annual £20,000 contribution limit.
But with so many amazing bargains to choose from at the moment (27 March), it can sometimes be difficult to identify the best opportunities when it comes to actually buy stocks with the money. However, given recent events in the Middle East, it didn’t take me long to decide what to do…
An old favourite
After seeing the Rolls-Royce (LSE:RR.) share price fall around 15% from its 52-week high, I thought it was time to add to my existing holding.
As well as creating a general feeling of uncertainty, events in the Middle East have taken their toll on the aviation industry. With thousands of flights cancelled and the region’s skies closed intermittently, there’s bound to be a loss of revenue for the group that generates most of its profit from its civil aerospace division on a ‘per hour’ basis.
Investors are probably expecting the group’s next couple of trading updates to be a little disappointing. They will be if we experience another round of inflation that reduces the demand for air travel. And with the group’s shares trading at a high multiple, even a small earnings miss is likely to have a big impact on its market-cap.
However, I suspect the group’s defence division will continue to benefit from increased geopolitical tension. In 2025, countries in the Gulf contributed 8% of group revenue. And so far at least, there doesn’t seem to be a slowdown in spending on data centres. This has been helping Rolls-Royce’s power systems business.
A bright future
Personally, I think the biggest driver of future growth will continue to come from its aircraft engines. The pandemic reminded us how critical the sector was. In common with many companies with exposure to the airline industry, Rolls-Royce compares its current performance to pre-Covid levels. In 2025, it reported large engine flying hours at 111% of their 2019 level.
And I see no reason why this shouldn’t continue to rise further.
The group claims it has a 38% market share of the “installed widebody base”, up from 34% at the end of 2022. This group claims it’s supplied more than 50% of new engines to the market during this period.
Aviation analytics company Cirium expects 43,000-46,500 new commercial aircraft to be delivered over the next two decades. Ariund 75% of these will be for single-aisle aircraft. Rolls-Royce has announced its intention to return to this part of the market, probably with a joint venture partner. If all goes to plan, just imagine the potential for the group if it can replicate even part of the success it’s had from supplying engines to larger aircraft.
Of course, there are no guarantees the war will end soon. If it drags on, the group’s civil aviation business will be badly affected. Even so, I’m taking a 10-year view here. Over the long term, I think Rolls-Royce will continue to deliver impressive results. That’s why I recently added a few of the group’s shares to my Stocks and Shares ISA. And why other investors could consider doing the same as we come to the end of the current tax year.
