There’s no such thing as a sure thing when it comes to investing, despite what message boards for certain stocks might suggest. Even FTSE 100 shares with strong track records can suddenly experience trouble that damage profits.
Those with small reserves of cash might only have enough to build a decent stake in one or two shares. In this case a good idea could be to invest it in firms that have defensive operations, like utilities or healthcare providers.
Growth might be more muted here than at other stocks. Yet the chances of making a loss with such businesses can also be lower.
BAE Systems (LSE:BA.) is one rock-solid FTSE 100 share on my radar today. Here’s why I’d be happy spending my last £2,000 on it now.
Why I’d buy BAE Systems
Buying shares in defence companies can sometimes be a headache for investors. Project delays can take a big bite of yearly earnings.
The threat of a high-profile technological failure is also a constant danger. This can have severe ramifications like loss of life and the problem of key technology falling into the ‘wrong’ hands.
Yet investing in defence stocks can still be one of the safest places to park cash. Global arms spending remains largely unaffected by broader economic conditions, meaning sector-wide earnings usually remain robust.
Buying shares in FTSE 100 operator BAE Systems (LSE:BA.) adds another level of protection for investors. It can face bumpiness in the awarding of contracts and needs to continue funding its cash-intensive development programmes. But it has the scale to face all this.
Strength in depth
I also like the business because of its wide portfolio of technologies. From building boats, tanks and ground assault vehicles, right through to designing radio systems, missiles and cyber security software, BAE Systems has its fingers in many pies.
Not only does this give the company exposure to certain fast-growing sectors. It also helps protect group profits from demand weakness in one of two product segments.
Finally, I like this particularly defence firm because of its strong relationships with the UK and US militaries. It has built a robust layer of trust that dates back decades, and its market-leading tech is critical in helping governments and armed forces meet their goals.
On Friday, for example, the Ministry of Defence announced BAE Systems was one of several contractors to share a £650m pot for building its Tempest fighter jet (due in 2035).
Consistent growth
Thanks to these qualities, BAE Systems has increased yearly earnings in four of the past five years. Encouragingly, City analysts expect this proud record of growth to continue too.
Earnings are tipped to advance 6% in 2023 and 10% in 2024. And these bright forecasts mean BAE Systems is also expected to keep raising dividends as well. So the defence giant carries handy yields of 2.8% and 3% for these years.
I think BAE Systems is one of the best safe-haven stocks out there. It’s why I’m looking to build a position in the company soon.
