BAE is our weapon of choice for 2014 but has so far been more of a sparkler than a leathal weapon.

Our main concern is the strong £, which will hurt underlying earnings.

Growth has been lackluster and geopolitical issues although all around us have not translated into sales right now.

We still think defense spending has bottomed, although see no real catalyst near-term.

Bit of no man’s land here and we are closing our position for a 3% profit into tomorrows numbers.

A name we will look at again post numbers.


Thursday • 20 February 2014 • 17:16

Well our weapon of choice for 2014 BAE has backfired on us so far apologies.

Although it is tempting to walk away from this trade I think 2014 will still be a good year for defence.

The company themselves have said they feel they have reached the bottom in US defence spending reductions.

They may well be book talking but that has been backed up by Rockwell Collins CEO who says he also sees U.S. Defense Spending Bottoming in ’14.

The bad news is priced in and with the improvement in Saudi relations and the tension between China and Japan continuing defence spending will be stronger this year.

We are buying more BAE here on a 6-12 month view and even on a ST view with the fact that the buy back still has a way to go and will also be supportive for the name and makes divi less relevant.


Wednesday • 19 February 2014 • 09:01

BAE says UK, Saudi Arabia agree on increased typhoon jet prices.

This will be taken well as most took that out of their numbers..

Stay Long the BAE weapon of choice for 2014.



Friday • 20 December 2013 • 09:21

UAE Rules Out Eurofighter Deal is clearly -ve for sentiment although not sure it was in many peoples numbers.

Still in negotiation with the Saudis on the price inflation agreement on ongoing contract. Still very likely that gets done in the next few months.

Looks more like a PR mess/embarrassment.

Military orders are hard top predict.

From a global perspective I believe that 2014 will see an increase in defence spending firstly from US budget agreements leading to increased spending.

China Japan tensions are just starting.

Japan has already increased its defence budget recently following a white paper on defence.

China will continue at a pace to become a world military force and close the gap on the US.

BAE is still cheap in absolute and relative terms to competitors and pays a healthy dividend and 2014 will be a good year for defence stocks in general.