According to Edwin Starr, absolutely nothing, but shareholders of BAE Systems and other European defence stocks might beg to differ as the chart below shows.
If you are lucky (and lucky may be the appropriate word) enough to own the share(s) you maybe feeling smug, but in truth the expression ‘better to be lucky that good’ rings true. The war in Ukraine came at a good time. The shares were going nowhere as usual and positioned once again within the Apollo derating cycle. Since the war started the shares have rallied 70%, proving that war is indeed helpful if not good.
Aside from those folk the other shareholders are likely to be the momentum traders – a transient group of rentiers who will have literally jumped on the armoured vehicle and are now along for the ride – a ride they are not in control of. A ride that Nvidia, Novo and Tesla shareholders might recognise.
For now the real pain is suffered by those that don’t own the defence stocks (as it was for those that didn’t own the MAG7 or the .com stocks before that) – those that couldn’t justify valuation based on risk and return and have had to watch as the share price disappeared into the horizon and continues to do so. They had their chances as the Apollo signals proved, but you had to buy into the investment case in the first place which as suggested above was never easy.
So they are suffering but it they are now not alone. It will provide little comfort but it’s worth remembering that current shareholders will be nervous and justifiably living with a daily fear of loss and wondering when and if their own DeepSeek moment is around the corner.
Using the Apollo Margin of Safety the probability of expected returns for BAE Systems ranges between £23.00 – £14.00. The upper limit if the geopolitical situation remains as it is / gets worse or £14.00 if there is a universal ceasefire tomorrow. Today the share price closed at £19.29. There is a lot of pain in way, but we just don’t know who for yet?