We will find out in the coming days whether the extreme share market volatility of recent days is the start of a painful correction or a mere flash in the pan.
Like many across the investment community, I believe we may now be past the worst of it. But stock pickers can still protect themselves from any fresh shakes by buying up blue-chip beauties in traditionally defensive sectors.
Defence giant BAE Systems (LSE: BA) is one company I have long talked up as a canny destination for share pickers. And I reckon right now is a sound time to revisit the FTSE 100 firm’s investment case.
Mankind’s destructive desire to wage war upon itself is the one constant of history, meaning that demand for BAE Systems’ high-tech aeroplanes and weapons systems can always be relied upon, whatever the weather.
And arguably the geopolitical situation right now is volatile. Donald Trump and Kim Jong-un continue their war of words, Russia and China pursue their expansionist policies, and global terrorism is spiking, which means that the Footsie company’s sales outlook is stronger than it has been for many years.
But this is not the only reason to pile into the London firm today. For nervous investors, BAE Systems’ broad geographic footprint is adding an extra layer of protection to future earnings. Long-term defence spending from the company’s traditional US and UK customers is likely to remain largely robust, while lucrative contract wins keep streaming in from its clients in the Middle East.
Certainly City analysts are expecting profits at BAE Systems to continue their upward march. Last year’s predicted 6% bottom-line improvement is expected to be followed by a 2% rise in 2018. And another 6% increase is forecast for next year.
These projections mean the arms-maker is an appealing value share, the Footsie giant sporting a prospective P/E ratio of 13.2 times. However, there’s plenty for income investors to get their teeth into too, BAE Systems carrying market-beating yields of 4% and 4.1% for this year and next.
Those fearing fresh blood on the stock market floor may also want to take a close look at precious metals producer Hochschild Mining (LSE: HOC) today.
Gold and silver are of course classic rush-to-safety assets, and this is reflected in the robust buying that has kept bullion prices locked in a tight range around January’s 18-month peaks above $1,350 per ounce. A fresh weakening US dollar, a very-likely scenario given the ongoing political intrigue in Washington, would cause prices of these commodities to power higher again.
What’s more, Hochschild is stepping up production to give earnings growth an extra boost. The London-based digger, which has assets all over The Americas, produced a record 513,598 gold equivalent ounces and 37m silver equivalent ounces in 2017.
Against this backcloth, City analysts are expecting the FTSE 250 business to grind out splendid earnings expansion of 37% and 29% in 2018 and 2019 respectively. These projections also make Hochschild brilliant value for money as investors need to look past a weighty forward P/E ratio of 32.4 times and instead concentrate on a corresponding sub-1 PEG reading of 0.9.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the 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.