For those that are bearish on the market and frustrated with fiscal irresponsibility, one company that might be worth a look is Boeing. There is an article in WSJ implying that there could be further delays in delivery of the 787 Dreamliner. The plane is already 2 years behind schedule mainly due to issues involving the composite materials which make up the plane’s fuselage.
I wrote about Boeing a few weeks back as a stock that I have on my long term watchlist.
The bad news this morning is sending the stock down to $49.50 in the pre-market. Notice the 200 and 300 day SMA are marching up to horizontal support at $45. I would like buy BA at $45-46 as a long term holding. I think there is a chance of this happening if they announce a delay of the test flight next month and/or we get a general market pullback due to the Dollar finding support.
I almost never discuss fundamentals, but BA is a stock that I try to own when the technicals look good. It is the polar opposite of a paper tiger like AIG and C. It is a company with engineers and people that actually produce goods.
What is not to like? They are an oligopoly with Airbus as their only serious competitor. Airplanes require constant updating and it is a real durable good that the world needs. Long term, it is likely that the Dollar continues to decline which is good for an exporter like Boeing (let’s face it, the Dollar has been in a constant decline for years).
Moreover, because Boeing is so vital to the American economy, it certainly has the US Government behind it. Trust me, if they were willing to bailout GM they would be willing to bailout our biggest exporter and one of the top military defense manufacturers. So not only can’t Boeing fail, but it also gets subsidies and other support from the Government.
The tough part about owning Boeing is that you have to own it when the cycle is right. Whenever they introduce a new series of airplanes, there is always a euphoria about the revolutionary changes the new planes will bring to aviation [think the introduction of wide body aircraft such as the 747 (Boeing), DC-10 (Douglas) and L1011 (Lockheed) in the 1970s and the 777 (Boeing) in the 1990s]. The euphoria period is a great time to own the stock. Unfortunately, once the plane moves to its production stage the stock must be sold. This is because throughout the company’s history the delivery of the planes are always delayed and the cost to build the airplane usually turns out to be higher than expected. This pops the euphoria stage.
We’ve been in the post-euphoria cycle for a couple of years now but I think we’re starting to turn the corner. We’re getting to the point where most of the disappointments should be behind the company and the plane may actually fly within the next 6 months (I’m not betting on December based on the WSJ article).
So if I can get a good entry, I’m hoping to add this one as a long term holding to my retirement account.
Today, the Dollar is down and the market is showing a higher open right now. Retailers ANF and JCP reported earnings and the market appears to like the numbers. Both companies are up solidly in the pre-market.
