BAE Systems has been the best way for UK-focused investors to position their portfolios for increased defence spending in response to increased aggression by Russia.

Indeed, the BAE Systems share price has tripled since Putin rolled his tanks into Ukraine in February 2022.

However, there is mounting evidence to suggest the share price has gotten a little ahead of itself from a valuation perspective, and investors should consider the medium-term performance of the stock from elevated levels.

With the prospect of peace in Eastern Europe looking just slightly more likely after Trump met separately with Putin and Zelenskyy this week, the defence spending trade could become less attractive, making companies such as BAE vulnerable to selling.

Throw into the mix an earnings multiple that puts the stock on the highest valuation for nearly two decades, and BAE Systems shares look set for a correction.

BAE Sysems’ recent performance

Beyond the geopolitical situation and high valuation, there are plenty of positives to take away from the group’s recent half-year report.

BAE Systems secured £13.2bn in new orders during the first half of 2025, with all segments enjoying higher order flows. The company closed the period with a substantial order backlog of £75.4bn, providing exceptional revenue visibility and underpinning future cash generation.

This backlog, combined with programme incumbencies on long-term contracts, supports BAE’s value-compounding business model and offers investors predictable earnings growth.

Key successes stories include Typhoon combat aircraft, Type 26 frigates, Dreadnought submarines, electronic warfare systems, precision munitions, and space-based capabilities. BAE’s participation in strategic programmes like GCAP (Global Combat Air Programme), AUKUS submarine development, and the US Golden Dome project positions the company to capture significant long-term contracts.

However, for all the predictability of cash flows and heightened demand for arms, earnings growth hasn’t exactly wowed investors.

First half revenues grew 11% and EBIT rose 13%. While these are solid numbers for a firm of BAE’s scale, they don’t seem high enough to justify a valuation of 25x historical earnings.

For many years, BAE Systems traded between 10x -16x earnings. The current 25x multiple is an outlier.

Forward earnings on analyst estimates fall only modestly to 22.5x earnings.

Earnings will continue to be underpinned by higher defence spending plans. NATO members agreed to increase defence investment to 5% of GDP—a significant jump from the previous 2% benchmark.

However, it appears the market has already priced in many years of increased defence spending and BAE profit growth, which isn’t a 100% certainty, making BAE Systems vulnerable to profit-taking.

You can afford BAE Systems a higher valuation than historical averages due to the likelihood of geopolitical tensions persisting in the years ahead.

But 20x earnings seems more sensible than 25x. This would put BAE Systems shares back down to 1,360p.

Angling Direct’s strategic shift to focus on growth in online channels and its loyalty programme is paying off with revenue climbing 17% to £53.6m in the six months to July 2025.

The specialist fishing tackle retailer saw strength across both its retail and online channels during the period.

UK retail stores drove significant growth, with sales rising 15.4% to £30.5m. Online performance proved even stronger, surging 21.2% to £20.6m as the company benefited from higher transaction volumes and increased customer numbers.

The omni-channel approach appears to be paying dividends. Total UK like-for-like sales grew 14.2%, whilst the company’s MyAD customer loyalty programme swelled to over 496,000 subscribers by July – up from 409,000 at the start of the year. The milestone of 500,000 members was reached in August.

Store expansion continued apace during the period. A new Chester outlet opened in May, followed by a Bradford store after the period end, bringing the total estate to 55 locations across England and Wales. Management cited “increasing levels of footfall” as underpinning strong store performance.

European operations remain modest but showed promise. The Utrecht store, which marked its first anniversary in May, saw customer visits almost triple in June and July compared to the same period last year. Overall European sales edged up 5.1% to £2.5m, though the digital market remains challenging.

Perhaps it was this weakness in Europe that curtailed investor enthusiasm on Wednesday with shares down slightly in early trade.

“I am pleased to report that we have delivered another period of sustained progress against our medium-term objectives. Our increasing customer appeal underpinned by our loyalty fishing club, MyAD, and the associated growth of revenues in our existing UK stores and digital platforms, provides us with further confidence in achieving our medium-term UK revenue target of £100m,” said Steve Crowe, CEO of Angling Direct.

The FTSE 100 gained on Tuesday as UK-centric stocks drove the index higher amid optimism around Ukraine talks and UK grocery inflation data.

London’s leading index was 0.2% higher at the time of writing.

In addition to the end of human suffering in Ukraine, investors will be pleased that last night’s talks hinted at a path to peace in Eastern Europe and the potential removal of inflationary pressures on oil and food prices caused by the conflict.

“There’s relief that talks between Trump, Zelensky and European leaders appear to have made good progress,” said Susanah Streeter, head of money and markets, Hargreaves Lansdown.

“With the US President sounding highly positive on giving security guarantees and protection to Europe, it has bolstered hopes for a longer lasting settlement. Ukraine is offering to purchase around $90 billion of American-made military equipment as part of the deal.”

UK consumer sensitive stocks had a solid session on Tuesday after promising data from Worldpanel on grocery inflation.

JD Sports, Marks & Spencer, and Persimmon were the FTSE 100’s top risers after data showed grocery inflation slowed, hinting at an easing of the pressure on household budgets.

“We’ve seen a marginal drop in grocery price inflation this month, but we’re still well past the point at which price rises really start to bite and consumers are continuing to adapt their behaviour to make ends meet,” commented Fraser McKevitt, head of retail and consumer insight at Worldpanel.

Should the worst of grocery inflation be behind us, investors will be hopeful that consumers have more to spend on JD’s £180 trainers, Marks & Spencer’s premium food ranges, and may even consider upsizing to one of Persimmon’s newly built homes.

JD Sports was the top riser as the combination of positive grocery prices and a price target upgrade from Deutsche Bank helped shares rise 6%. Deutsche Bank analysts now have a 100p target on the stock.

The resulting good news from last night’s Ukraine meeting sapped demand for the FTSE 100’s defence shares. Babcock shares sank 6% while BAE Systems lost 3%.

Although Ukraine has committed to defence spending, the funds will flow into the coffers of US defence firms, bypassing Babcock and BAE Systems.

Tekcaptial portfolio company Guident has announced the appointment of Michael Tessler to its Board of Directors ahead of the AV safety company’s proposed NASDAQ IPO.

In a clear sign of intent, Guident has bolstered its leadership team with US tech titan Michael Tessler, who brings deep experience scaling listed technology businesses and achieving a billion-dollar takeover.

Michael Tessler founded BroadSoft before growing the company to a technology and communications giant with 2,000 employees serving customers in more than 80 countries.

BroadSoft was acquired by Cisco for $1.9bn in 2018.

Tessler brings this expertise to Guident as the company prepares for a proposed NASDAQ IPO at a time of accelerating adoption and deployment of autonomous vehicles.

“I am excited to join Guident’s Board at such a transformative time for the AV industry. Guident’s groundbreaking technology has the potential to redefine safety and reliability in autonomous transportation. I look forward to working with the Board and management team to help guide the company’s strategic direction and growth,” Michael Tessler said.

Guident provides safety technology for a range of autonomous vehicles, including buses, shuttles and surveillance robots. Tessler’s appointment will support the rollout of Guident’s technology to additional customers and add a heavyweight to the board ahead of a major milestone in Guident’s growth story.

“We are honoured to welcome Michael Tessler to Guident’s Board of Directors,” said Harald Braun, Chairman and CEO of Guident.

“Michael’s established track record in building high-growth technology companies and his visionary leadership will be pivotal as we continue to expand our solutions for safe and reliable remote monitoring and teleoperation of autonomous vehicles.”

Applied Nutrition shares rose on Tuesday after the group announced revenues would be ahead of guidance provided at the time of its IPO.

The firm achieved revenue growth of approximately 24% year-on-year for the financial year ending 31 July 2025 with revenues of around £107 million, up from £86 million in the previous year.

The results exceeded market expectations, driven by strong second-half trading of approximately £60 million. Adjusted EBITDA also grew by around 19% year-on-year, whilst net cash reached approximately £18.5 million, ahead of forecasts.

There’s more good news for investors. Applied Nutrition has not only smashed expectations for the last year, but it also expects 2026 revenue to surpass current market expectations.

Shares in the sports nutrition group were 9% higher at the time of writing.

The group said it would continue to focus on its core strengths, including its B2B-focused business model and industry-leading product development capabilities.

Applied Nutrition will release its full-year results on or around 10 November 2025.

“We are proud to report that we have exceeded the guidance we gave at our IPO, with our first full-year results expected to come in ahead of market expectations,” said Thomas Ryder, CEO of Applied Nutrition.

“Our focus and ambition remain as strong as ever – in delivering for our shareholders, customers and team – and we are excited about the opportunities we have in the pipeline for the year ahead.”

Power Metal Resources has inked an agreement to sell its remaining stake in Guardian Metal Resources for £13.6 million in cash.

The London-listed exploration company sold its stake to an investment fund managed by Duquesne Family Office LLC to wrap up the realisation of Guardian Metals for a whopping 11.6x return.

The sale represents a significant cash injection for Power Metal Resource, which will use the cash to further develop the rest of its early-stage mining portfolio.

“I am very pleased to be able to announce that we have agreed terms to exit our position in GMET after what has been an enormously successful investment for Power Metal, and one that has generated very considerable shareholder value,” said Sean Wade, Chief Executive Officer of Power Metal Resources.

Our original investment in GMET was £1,935,275. Over the course of two disposals, we will have realised £22,809,988 before costs, a return of 11.8 times.

It represents a strong validation of our incubator model and gives us considerable firepower now to pursue other opportunities, a number of which have presented themselves to us in recent weeks.

I look forward to further updating shareholders, as appropriate, on the destination of some of these funds as we continue to build on our proven and successful business model.”

Power Metal shares were 8% higher in early trade on Tuesday, valuing the company at just £17m despite now having an additional £13m cash in the bank.

The FTSE 100 was on the back foot on Monday as investors erred on the side of caution ahead of a busy week for geopolitics and US monetary policy.

London’s leading index was down just 10 points at the time of writing, reflecting mild profit-taking as opposed to outright risk aversion.

After Trump’s meeting with Putin yielded nothing more than a photo op and footage of US stealth bombers flying over Putin’s head, attention has shifted to Trump’s meeting with the Ukrainian leader and European partners this evening.

Again, this isn’t expected to produce any meaningful market-moving news, but the unpredictability of Donald Trump is reason enough to be cautious.

Perhaps the foremost factor pulling the FTSE 100 into minor negative territory on Monday is the upcoming Jackson Hole Symposium and potential for Jerome Powell to be slightly more hawkish in his interest rates commentary than the market would like.

“Investors are…waiting for the upcoming Jackson Hole central banker meeting, for clues about the direction of interest rates in the United States, with expectations that recent data will pave the way for more cuts,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

“Despite the fierce criticism he’s had to shoulder from President Trump, Fed chair Jerome Powell is not expected to set a firm path for rate reductions.”

Cyclical sectors fell on Monday, with miners and financials leading the way lower.

Centrica was the FTSE 100’s top faller as traders sold the stock after it failed to breach technical resistance at the 170p mark for the fourth time since the beginning of June.

Defence shares, Babcock and BAE Systems, were among the top risers on hopes of reiterated commitment to boosting defence spending by European countries.

Babcock was the top riser with a gain of 4% after equity analysts at RBC gave the stock a 1,200p price target.