These gloomy Covid-19 days are throwing up all kinds of share buying opportunities. And I think BAE Systems (LSE: BA) is one of them. In February, with the shares buoyant, you might have thought you’d missed the boat. But just a month later, after the virus horror struck, the BAE share price was 36% lower.
With the near total shutdown of commercial aviation, I can understand why investors shunned BAE Systems during the crash. But I think they made a big mistake. BAE’s defence businesses account for 90% of its revenues, and I see those as rock solid. Defence is long-term work too, and do you think there’s going to be any real impact from the pandemic lockdown? I don’t.
The BAE share price has recovered tentatively since March. But it’s still fallen 13% year-to-date, and is down 27% since that February peak. I reckon BAE shares could be one of the best FTSE 100 buys right now. A trading update Thursday has cemented my opinion.
High working levels
Though the firm’s working practices were certainly hampered by the pandemic, things are sounding very positive right now. Productivity levels in BAE’s defence business are improving, and the company says most of them “now have well over 90% of employees working“.
BAE also told us: “Demand for our capabilities remains high with order intake in line with our original expectations for the year“. The board does expect first-half profit to fall by around 15%. But really, that’s the kind of mild hit that so many companies can only dream of at the moment. I see no crisis here, and no reason for the BAE share price to be so low.
I’ve always seen BAE as a company with a strong grip on its finances, and a very firm long-term view. It’s not interested in pandering to short-term demands from the fickle market. Many companies wait until they’re practically at death’s door before they consider cutting their dividend, and keep promising it will continue. But BAE decided months ago to defer its decision on its 2019 final dividend. And this week’s update confirmed that it “will provide an update with the group’s half year results next month“.
BAE share price attractive
Whether the dividend is paid as originally intended, paid in a reduced amount, or totally suspended for the good of long-term liquidity, I think BAE shareholders will simply accept the outcome. It’s just not a company that attracts the get-rich-quick crowd, or those trying their hands at timing share prices in the short term.
If you want further examples of BAE’s long-term attractiveness, I can point you to its order backlog of approximately £45bn. The company is also still on target for recruiting a record number of apprentices. There should be around 800 news ones, and that kind of investment in people is the way towards decades-long progress.
I’ve always liked BAE as a long-term investment. And with the shares being depressed now, I’m seeing an even better buy.
Alan Oscroft 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.