Last week, I bought some Rolls-Royce (LSE: RR.) shares for my ISA. I paid 1,459p per share, so I’m obviously very late to the party given that they were trading below 100p only a few years ago. <\/p>\n
Why did I buy them now? Three reasons\u2026 <\/p>\n
I wanted industrial exposure <\/p>\n
One is that I’ve been looking to get more industrial exposure within my ISA. Currently, my portfolio’s very tech-heavy and I want to be a bit more diversified. <\/p>\n
What I like about Rolls-Royce is that it has three different business segments \u2013 civil aviation engines, defence, and nuclear power. So it has a number of ways to generate growth. Having three different segments also lowers risk a bit. For example, if conditions are weak in the civil aviation space, the company could potentially still do well. <\/p>\n
I’ll point out that in the long run, both the defence and nuclear divisions have a lot of growth potential. I’m particularly excited about its nuclear prospects \u2013 there’s a ton of potential here. <\/p>\n
The share price has fallen <\/p>\n
The next reason I bought is that the shares were trading about 8% below their highs. In early August, they were at 1,585p. Now obviously an 8% pullback isn’t huge. In the past though, buying the dip has paid off. <\/p>\n
I’ll point out that I’ve come close to buying on previous dips. For example, when the share price fell to around 1,100p in April, I took a good look at the stock. Annoyingly, I didn’t buy then. So I didn’t want to miss this opportunity. <\/p>\n
Strong results and rising price targets <\/p>\n
Finally, results continue to be very strong. In late July, the company posted a 46% increase in underlying operating profit for the first half of the year. On the back of this performance, it raised its full-year 2026 guidance. For the year, it now expects underlying operating profit of \u00a34.7bn-\u00a34.9bn. <\/p>\n
Note that since these results, a number of brokers have raised their price target for the stock. For example, Jefferies has gone to 2,000p (37% above my Buy price) while Berenberg has gone to 1,900p (+30%). <\/p>\n
A falling share price in the face of strong results and rising broker price targets is a trading pattern I look for. In the past, I’ve had success with this set-up. <\/p>\n
The stock’s still pricey <\/p>\n
Now, it’s worth pointing out that the company’s valuation is still high. Looking at earnings forecasts for next year, the forward-looking price-to-earnings (P\/E) ratio is about 30. <\/p>\n
The stock may need some time to grow into this valuation. And it could see further weakness along the way \u2013 a drop to 1,200-1,300p wouldn’t surprise me. <\/p>\n
I’m comfortable with short-term share price volatility though. For me, this is a long-term hold. I’ve started with a very small position. I plan to build it out slowly over time, buying on the dips. <\/p>\n","protected":false},"excerpt":{"rendered":"Last week, I bought some Rolls-Royce (LSE: RR.) shares for my ISA. I paid 1,459p per share, so…\n","protected":false},"author":2,"featured_media":116078,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[20731],"tags":[1825,46710,23067,1238,23179,20767,46319],"class_list":["post-118565","post","type-post","status-publish","format-standard","has-post-thumbnail","category-rolls-royce","tag-isa","tag-mark","tag-mark-rogers","tag-rolls-royce","tag-rolls-royce-holdings","tag-rolls-royce-plc","tag-twelfth-magpie-share-advisor"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@UnitedKingdom\/117223198877787602","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts\/118565","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/comments?post=118565"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts\/118565\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/media\/116078"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/media?parent=118565"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/categories?post=118565"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/tags?post=118565"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}