In a keynote speech this week, Nato secretary general Mark Rutte issued a stark warning about Russia’s threatening behaviour.
“President Putin,” he warned “is in the empire-building business again. He is throwing everything he has at Ukraine, killing soldiers and civilians, destroying the havens of humanity.”
Not only that, the former primer minister of the Netherlands further pointed out that “Russia’s economy is now geared to wage war……spending nearly 40% of its budget on aggression.”
In other words, the Russo-Ukraine conflict will drag on into 2026 – and beyond. NATO countries have to continue to maintain, improve and integrate their defence capabilities.
For many arms manufacturers, there are more work to be done to keep Europe safe.
Babcock (LSE:BAB) is one of these UK defence contractors that is seeing a sharp revival in its outlook. Its latest six-month revenue topped £2.5 billion.
While Babcock started 2025 on a backfoot, its share price sprinted upwards throughout the year. Prices doubled; and 1,000p was reaffirmed as support recently.
Next year may be another good year for Babcock. The company’s market cap is only £6 billion and prices are on the verge of taking out the previous all-time highs established nearly a decade ago.
In sum, the stock is in the right sector, generating good profits, and developing the right chart pattern. The only logical conclusion, then, is to side with the market and go long here.
