BAB
🛡️ Babcock’s core business provides essential, long-term defense services, primarily maintaining the UK’s military readiness, offering significant defensiveness.
📈 The company was initially bought at a discount due to its stability, saw increased investment during COVID-related price drops, and is now being sold as defense sector valuations rise.
💰 Recent share price appreciation (over 50% year-to-date mentioned) is driven by general defense sector interest, prompting Cobas to realize profits despite the company’s stable outlook.
@CobasAssetManagement:
“Starting with the first one, Babcock, we invested a little bit when we launched the fund. The idea was basically, almost all were new ideas in the sense that, well, we were launching a fund, right? We had to create a portfolio, and this company offered a lot of defensiveness because it has super long-term contracts in things that hardly vary as decades pass; we vary very little. It’s services; basically, what they do is prepare the UK army, that is, training, maintenance of military facilities, maintenance of military equipment, that kind of thing. So that will continue regardless of whether there are wars or not. So if you are able to buy it at a discount, as in principle it varies very little, well, you don’t risk much and you have a reasonable return, right? And it gives defensiveness to a portfolio that back then had more cyclical exposure. So having defensives was good. What happened is that, well, Babcock had four divisions, one got a bit complicated, the stock price started to fall, we bought some more with that. Then COVID came and it fell much more, we bought many more shares. We lowered the average price a lot, and basically now, we are in the process of selling. It still has potential, but you know we sell as soon as we find something better, and that’s it. Why are we selling now and haven’t sold before? Well, now defense companies pay a bit better, even if the increase in defense budgets doesn’t affect them much because, as we said, it’s mostly about maintaining what’s there. So the increase won’t be seen for a few years, so there isn’t that much impact. In fact, Babcock, year-to-date, has risen more than 50%, so that’s also why it’s normal that we are selling because they’ve had a very good return. Many people are buying the defense sector, ‘buy defense sector,’ whatever is there, and we are delighted that they buy from us, and that’s it. We are already investing in something else.”
Watch the exact part of the video where @CobasAssetManagement talks about Babcock International Group PLC here:
Watch the video on YouTube
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