So far this year, we've added three new names to our share research coverage across three different sectors – healthcare, semiconductors and defence. Our initial views are below, and for those opted into our share research, we’ll now be regularly updating them on Intuitive Surgical, Broadcom and Babcock International.
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We regularly review the stocks on our research coverage list, and on occasion, stocks may be added or removed based on a range of criteria.
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Babcock International
Babcock is a UK-based aerospace and defence company that designs and manufactures key military equipment across land, air and sea. The group’s Nuclear division owns and manages civil nuclear projects and supports the entire UK’s submarine fleet. Babcock also receives substantial revenue from providing support and engineering services, which can help smooth out peaks and troughs in large equipment orders.
With geopolitical uncertainty rising, governments around the globe are becoming more focussed on improving their defensive capabilities. The UK and other NATO members have committed to boost their defence spending from 2% to 5% of GDP by 2035, so Babcock looks well-placed to benefit from this long tailwind and capture some of this extra spending.
That’s already feeding through to a growing order backlog of £9.9bn. This is equivalent to more than twice 2025’s revenue, giving the group great near-term visibility on demand.
Recent financial performance has been impressive, with all segments except Land reporting strong top-line growth in the first half of the year. Alongside improving margins thanks to contract renegotiations and efficiency improvements, first-half underlying operating profits jumped 19% to £201mn.
Nuclear continues to be the driving force behind the group’s performance, accounting for nearly 40% of total revenue, of which Defence accounts for the lion’s share. But nuclear energy is increasingly being seen as part of the solution to climate change and to improving energy security on the civil side. The market opportunity is huge, and with nuclear contracts typically lasting 5-10 years, that’s underpinning the division’s expectations for double-digit revenue growth over the medium term.
The forthcoming retirement of the current CEO, David Lockwood, does bring some uncertainty. But his replacement is the current CEO of Babcock’s Nuclear division. With an internal candidate that already knows the business, and a handover period where the two will work together, we think the transition risk is fairly limited.
The balance sheet’s in good shape, with net debt levels trending lower. And with strong cash conversion, the group’s forward dividend yield of 0.9% and ongoing share buyback programme looks well covered. As always though, shareholder returns can vary and are never guaranteed.
All in, we think Babcock has a strong portfolio, with exposure to multiple long-term growth drivers. Strict regulatory requirements provide strong barriers to entry, helping keep competition at bay. Despite the run-up in valuation over recent years, we still see some modest upside on offer. However, the upcoming change in CEO brings some uncertainty, and due to its long-term contracts, supply chain disruptions and cost overruns are key risks to monitor.
Broadcom
Broadcom’s first-quarter results were strong, driven by rising demand for artificial intelligence (AI) chips, while the outlook and management’s commentary helped ease concerns around the demand trajectory. Orders are expected to build through the year, and the added colour on ramping deals for 2027 should act as a catalyst for earnings expectations to move higher.
Broadcom builds the essential chips and connectivity technology that move data around the world’s phones, networks, and data centres. This helps power the digital infrastructure behind modern cloud, communications, and AI systems.
AI has quickly become the growth engine, where Broadcom takes a different approach than peers like NVIDIA or AMD. While those companies design general-purpose chips and solutions that can be sold off the shelf to run a wide range of AI workloads, Broadcom typically works with big tech firms to help build custom-designed AI chips tailored to their needs.
In these partnerships, the customer often leads the chip’s architecture, with Broadcom helping turn that design into a high-performance, manufacturable product and providing the networking technology that links thousands of chips together.
There is a raging debate about which approach is best. For now, the NVIDIA model has a massive scale advantage, but Broadcom’s custom chips are gaining serious traction. We don’t see it as one or the other – instead, we think there’s room for both to grow as the overall market expands.
We do see two key risks here. The first revolves around what NVIDIA does next.
With the financial firepower to push deeper into the more niche areas of the chip market, we can see a path where Broadcom’s AI products face growing competition. There’s also a chance that major buyers like Alphabet ditch the co-design playbook and go it alone – but we see both outcomes as unlikely.
The financials are sound, and while there is a chunk of debt on the balance sheet from the VMware acquisition a couple of years ago, it's very manageable. If profits evolve as we expect, strong cash flows will leave plenty of room to pay down debt if needed.
We think Broadcom is well-positioned to capture a meaningful share of the growing custom AI chip market. Earnings expectations still look on the low side, and on our numbers, there’s strong profit growth and good upside on offer. There’s also the added benefit of some diversification from peers, given its focus on bespoke chips. That said, a lot rides on future orders, and we see this as a higher risk name than others in the sector.
Intuitive Surgical
Intuitive Surgical’s final quarter rounded off another year of double-digit revenue and profit growth. Better-than-expected earnings raised investor spirits on the day. Guidance for growth in surgical procedures looks a little light, but management has consistently under-promised and over-delivered.
The company’s the market leader in the complex field of robotic surgery. At around $2mn a piece, its flagship da Vinci systems aren’t cheap. But they do offer compelling benefits to both healthcare providers and patients, including reduced complication rates and shorter hospital stays.
That’s helped drive rapid adoption, with some 3.2 million operations carried out with assistance from the company’s platforms in 2025. With the latest generation of da Vinci still in the early stages of its rollout, there’s plenty of scope to add new hospitals and upgrade existing sites.
Once in place, the installed base of systems generates high levels of recurring income from instruments and accessories, which need replenishing after each operation. Alongside regular machine servicing, this provides excellent revenue visibility.
Yet there are some risks to be aware of. China is one market where Intuitive’s seeing intense competition. Meanwhile, tariffs have dented margins, and the boom in anti-obesity medicines is dampening demand for some surgeries.
However, we still see plenty of space for market penetration with potential to treble annual procedures based solely on established use cases of the technology. The total addressable market looks significantly higher and Intuitive is making good progress for approvals for use in new clinical areas. Regulatory clearance for several cardiac procedures in early 2026 opens the door to 160,000 minimally invasive heart procedures in the US and Korea alone.
Intuitive continues to innovate, spending $1.3bn on research and development in 2025. Its more recently launched Ion platform for lung biopsies has very strong momentum with procedures up 51% last year. The company was also an early adopter of AI and we see further scope for monetisation here.
Intuitive’s high levels of innovation are supported by a robust net cash balance of around $9bn and strong cash flows. While the company doesn’t pay a dividend, the healthy financials allowed share buybacks to the tune of $2.3bn last year. There are however no guarantees of a repeat in 2026.
We think Intuitive is well placed to keep its place at the forefront of surgical innovation. Consensus forecasts don’t look too demanding and even without upgrades there’s potential for upside. However, the company’s quality is reflected in a valuation at the top of the peer group, leaving the shares vulnerable to disappointments.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Past performance is not a guide to the future. Investments rise and fall in value so investors could make a loss. Yields are variable and not guaranteed.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.
