I knew I was coming late to the party when I added defence manufacturer BAE Systems (LSE: BA.) shares to my Self-Invested Personal Pension (SIPP) in March. The stock’s been going great guns for years and I should have leapt on board much earlier. 

As a result, they were trading at more than 20 times earnings, and yielding only around 2%. That’s not the profile of the type of stock I normally buy. I always feel popular and pricier shares are vulnerable to a pullback.

Most of the FTSE 100 stocks I added to my SIPP last year were dirt cheap, trading at around six times earnings, while yielding 7%, 8%, 9% and, in the case of insurer Phoenix Group Holdings, 10.6%. BAE Systems was the exception that proved the rule.

Not a cheap stock

Normally, I’d have waited for a dip before buying it, but we no longer live in normal times, as tensions with Russia and China grow. So I decided I wanted a piece of action and invested £2.5k on 7 March, buying 194 shares at around £12.75 each. On 8 May, I invested another £1k, buying 71 shares for £13.86 each.

On 5 June, BAE Systems paid me a £29.12 dividend, which I automatically reinvested to buy two more shares. Obviously, I’m not playing for high stakes here. I’d have bought more if I’d thought the BAE Systems share price was an outright bargain.

My shares haven’t exploded, nor have they crashed and burned. I’m up a solid 6.8% overall, but these are very early days.

Long-term investors have had a blast, with the shares up 49.9% over one year and 193.07% over five. Only retail conglomerate Frasers Group beat it over five years, climbing 201.16%.

I’m keen to buy more BAE Systems shares, but I’m wondering whether there’s enough value to justify doing it today.

FTSE 100 growth option

The orders are rolling in as geopolitical fears force Western governments to up their defence spending. BAE expects sales to rise 10-12% in 2024, lifting them towards £28bn.

Yet there are risks. If Donald Trump wins the US presidential election, he may not be as keen to spend US taxpayers’ money defending Ukraine. In Europe, resurgent right-wing populists could take a similar view. Also, I’m not the only one who thinks BAE Systems’ shares are fully valued right now. Markets could view any sales or profits hiccup harshly.

BAE’s three-year £1.5bn share buyback programme is almost complete. Happily, investors can expect another one to follow, as BAE continues to generate plenty of cash.

However, the shares don’t really tempt me at today’s valuation of 22.07 times earnings. That’s similar to March and May, when I did buy the stock. Yet I have my exposure now. I think I’ll wait for a dip before I buy more.

We may not get one, but that’s the chance I’ll take. I can see plenty of FTSE 100 stocks with lower valuations and higher yields, and I’ll target those instead.