Now Could Be The Perfect Time To Buy BAE Systems plc, National Grid plc And Diageo plc

When markets are gyrating wildly about as they have been this year, it tends to be the companies seeing big swings in their share prices that grab the headlines. And for value-orientated investors, it’s the biggest fallers that particularly demand attention.

Oil companies, miners and banks are hogging the spotlight, with the shares of many of them trading at or near multi-year lows. Analysts and investors are busy trying to decide whether now is the time to buy into these sectors, with an eye to huge potential recovery gains.

Meanwhile, companies with unspectacular moves in their share prices have been somewhat sidelined. BAE Systems (LSE: BA), National Grid (LSE: NG) and Diageo (LSE: DGE) are three excellent ‘get-rich-slow’ stocks that could be worth picking up while all the market excitement is focused elsewhere.

BAE Systems

Year-to-year earnings progression can be a bit up-and-down for defence giant BAE Systems, due to the size and timing of some orders. However, after thousands of years, plenty of people are still intent on metaphorically whacking other people over the head with wooden clubs, so there’s no reason to suppose there’ll be any let-up in the long-term demand for BAE’s products.

Last week, the company announced “another year of solid performance” for 2015. Sales increased 7.6% to £17.9bn, with underlying earnings advancing 5.8% to 40.2p, supporting a near-twice-covered dividend of 20.9p.

BAE trades on an attractive trailing price-to-earnings (P/E) ratio of 12.8 and yield of 4.1%. With a £36.8bn order backlog and recently-constrained defence budgets recovering, the future looks bright for the business and the shares appear worth buying.

National Grid

National Grid occupies a unique position in the UK energy chain. Being concerned with electricity wires and gas pipes, it avoids much of the opprobrium regularly heaped on consumer-facing utilities, as well the occasional volatility that can hit utilities with significant ‘upstream’ operations, such as Centrica.

In November, National Grid reported “a strong performance” for its half-year to 30 September. Revenue increased 7.7% and underlying earnings were up 22%. The company declared an interim dividend equivalent to 35% of the previous full-year payout in accordance with a policy, which also includes an aim to increase the dividend “at least in line with RPI for the foreseeable future”.

The analyst consensus forecast for the full year ending 31 March, puts National Grid on a P/E of 16 and a yield of 4.5%, which seems reasonable value for a company with a strong monopoly element to its business.


Global drinks giant Diageo owns a powerful stable of premium spirits brands, including Johnnie Walker and Smirnoff. The company has faced challenging trading conditions in some of its markets in recent years, as well as adverse currency effects, and the shares have made little headway. However, management has taken a number of actions to strengthen top-line growth and drive cost productivity, and is confident the company can “deliver improved, sustained performance”.

Diageo trades on a P/E of 21 with a yield of 3.1%, based on the analyst consensus forecast for the company’s financial year ending 30 June. Consumer goods businesses with the very top brands do tend to trade on high P/Es and relatively modest yields, and Diageo looks decent value as it comes out of a period of depressed earnings.

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G A Chester has no position in any shares mentioned. The Motley Fool UK has recommended Diageo. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.