If you had one chance to buy Rolls-Royce (LSE: RR) shares today, at 75p, and then the market would close for 10 years, would you buy?
I just asked myself that question, and I think my answer is yes.
Before I explain, let me clarify what I mean. I mean Rolls-Royce would carry on with its business unhindered. It would be able to raise new funding if needed, just as it can now. The only difference is that I would not be allowed to buy or sell any Rolls-Royce shares for 10 years.
I’m thinking along with Warren Buffett’s idea that, “If you are not willing to own a stock for 10 years, do not even think about owning it for 10 minutes“. Just imagine how a market in a stock actually closing for 10 years could focus our buying decisions today.
Share price collapse
The trouble is, it’s very hard to ignore the share price chart.
We’re looking at a 35% fall in Rolls-Royce shares over the past 12 months. And where many companies have at least partly recovered from the pandemic, Rolls is not among them.
When I see a fall like that, it makes me fear there could be worse to come. And even if I think Rolls-Royce shares might be cheap now, I can’t help feeling we could see even better buying opportunities in the months ahead.
Buy now?
Why might I buy now? I really do think we’ll see commercial aviation back to full strength in another decade. That would mean Rolls-Royce should be getting the hours back on its engines, and getting its maintenance-related revenue that goes with them.
Rolls is also pioneering lower-emission engines, and I see a possibility that it could steal some market share from rivals.
We’re also surely going to see a big increase in defence spending between now and 2032, aren’t we? I think the Russian war in Ukraine has almost guaranteed that. It would take time for it to roll out, but it could give Rolls-Royce shares an extra boost.
In 10 years
So, 10 years from now, I can see Rolls-Royce in a far healthier position than today. But thinking about the years between now and then, I get a bit twitchy.
With interim results, the company told us it expects to see “modestly positive free cash flow in 2022“.
That’s not the most encouraging financial target I’ve ever seen, certainly not for a company with net debt of £5.1bn. There’s only so much selling of assets a firm can do before it needs to get some serious profits coming in to deal with debts.
And this is all without considering the short-term harm that soaring inflation and a dire economic outlook could do to that hoped-for aviation recovery.
Verdict
So, my verdict? If I had one chance to buy Rolls-Royce shares now, and never again for another 10 years, I’d probably buy some.
But in the real world, I prefer to wait until there’s a bit less uncertainty. And perhaps an even lower share price in the months to come.