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FTSE 100 After a tough few months, major stock indices have skyrocketed again. Given the low UK share of blue chips and the changing priorities of investors, I think there is an even greater range of profits.
That’s “Challenging market conditions in February and March” Peel Hunt He said the background has been more positive since April.The Trump administration agreed to many trade deals with the UK and the interest rates were cut by the Bank of England.“.
More specifically, the investment bank said:We see rotation from US assets to Europe and greater institutional ambition towards the UK“.
This may not be a surprise to long-term observers of the London stock market. That’s not for me. The UK has a wealth of quality stocks that are below true value. I think the switch to UK stocks could continue as I fear US exceptionalism will creep in and worry about a massive valuation of the state’s stocks rising.
FTSE Bargain
But which UK stocks could rise strongly from current levels? Babcock International (LSE:BAB) is, in my opinion, a very undervalued despite the rise in stock prices of over 108% in 2025.
10.52 pounds per share, FTSE 100 20.3 times the price-to-revenue (P/E) ratio based on current estimates.
This may not seem like a scream at first glance. It’s about twice as close to the average of a wider footsea, about 11 times.
But in the broader defense industry context, this represents the good value of my book. To make Babcock’s P/E a context Wisdomtree Europe Defense ETF – It consists of 24 different large and intermediate companies, with 31.4 readings.
Investing in individual stocks is more dangerous than purchasing Exchange Sales Funds (ETFs) that spread the cash of investors. One particular disadvantage is that Babcock raises the majority of its revenues from the UK (about 75%) and is less geographically diverse than ETFs like WisdomTree.
However, I believe Babcock’s low share is greater than offsetting this handicap. Furthermore, the UK’s outlook for defence spending is on a clear upward trajectory. Last week, the government pledged to raise arms spending to 2.6% of GDP by 2027, becoming one of NATO’s most prolific spenders.
Stocks at these times
Unfortunately, the world is becoming more dangerous as the conflict that broke out between Israel and Iran last week demonstrated. In this climate, the global defense budget (which rose at the fastest pace since last year 1988) should rise sharply, according to Stockholm International Peace Institute, or SIPRI.
With a wide range of engineering, support and training services, Babcock is in a strong position to grow sales in this landscape. Revenues and underlying operating income here soared to 11% and 17% in last fiscal year (until March 2025), respectively.
Given obvious ethical considerations, defense stocks are not for everyone. However, on the contrary, some investors believe that these companies provide important services in protecting the country’s national interests. For the latter group, I think this share of the FTSE 100 is worth seriously considering today.