Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
CoronaVirus Pandemic Day 76 Trend Forecast Update - Infected 540k, Minus China 1715, Deaths 4920 - 23rd Feb 20 -
Ways to Find Startup Capital - 23rd Feb 20
Stock Market Deviation from Overall Outlook for 2020 - 22nd Feb 20
The Shanghai Composite and Coronavirus: A Revealing Perspective - 22nd Feb 20
Baltic Dry, Copper, Oil, Tech and China Continue Call for Stock Market Crash Soon - 22nd Feb 20
Gold Warning – This is Not a Buying Opportunity - 22nd Feb 20
Is The Technology Sector FANG Stocks Setting Up For A Market Crash? - 22nd Feb 20
Coronavirus China Infection Statistics Analysis, Probability Forecasts 1/2 Million Infected - 21st Feb 20
Is Crude Oil Firmly on the Upswing Now? - 20th Feb 20
What Can Stop the Stocks Bull – Or At Least, Make It Pause? - 20th Feb 20
Trump and Economic News That Drive Gold, Not Just Coronavirus - 20th Feb 20
Coronavirus COVID19 UK Infection Prevention, Boosting Immune Systems, Birmingham, Sheffield - 20th Feb 20
Silver’s Valuable Insights Into the Upcoming PMs Rally - 20th Feb 20
Coronavirus Coming Storm Act Now to Protect Yourselves and Family to Survive COVID-19 Pandemic - 19th Feb 20
Future Silver Prices Will Shock People, and They’ll Kick Themselves for Not Buying Under $20… - 19th Feb 20
What Alexis Kennedy Learned from Launching Cultist Simulator - 19th Feb 20
Stock Market Potential Short-term top - 18th Feb 20
Coronavirus Fourth Turning - No One Gets Out Of Here Alive! - 18th Feb 20
The Stocks Hit Worst From the Coronavirus - 18th Feb 20
Tips on Pest Control: How to Prevent Pests and Rodents - 18th Feb 20
Buying a Custom Built Gaming PC From - 1. Delivery and Unboxing - 17th Feb 20
BAIDU (BIDU) Illustrates Why You Should NOT Invest in Chinese Stocks - 17th Feb 20
Financial Markets News Report: February 17, 2020 - February 21, 2020 - 17th Feb 20
NVIDIA (NVDA) GPU King For AI Mega-trend Tech Stocks Investing 2020 - 17th Feb 20
Stock Market Bubble - No One Gets Out Of Here Alive! - 17th Feb 20
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20
The Growing Weaponization of Space - 14th Feb 20
Will the 2020s Be Good or Bad for the Gold Market? - 14th Feb 20
Predictive Modeling Suggests Gold Price Will Break Above $1650 Within 15~30 Days - 14th Feb 20
UK Coronavirus COVID-19 Infections and Deaths Trend Forecast 2020 - 14th Feb 20
Coronavirus, Powell and Gold - 14th Feb 20
How the Corona Virus is Affecting Global Stock Markets - 14th Feb 20
British Pound GBP Trend and Elliott Wave Analysis - 13th Feb 20
Owning and Driving a Land Rover Discovery Sport in 2020 - 2 YEAR Review - 13th Feb 20
Shipping Rates Plunge, Commodities and Stocks May Follow - 13th Feb 20
Powell says Fed will aggressively use QE to fight next recession - 13th Feb 20
PALLADIUM - THIS Is What a Run on the Bank for Precious Metals Looks Like… - 13th Feb 20
Bitcoin: "Is it too late to get in?" Get Answers Now - 13th Feb 20
China Coronavirus Infections Soar by 1/3rd to 60,000, Deaths Jump to 1,367 - 13th Feb 20
Crude Oil Price Action – Like a Coiled Spring Already? - 13th Feb 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Don't Get Suckered by the Boeing Media Frenzy, Instead Potential Buying Opportunity

Companies / Corporate News Jan 21, 2013 - 02:09 PM GMT

By: Money_Morning


Look for a chance to buy Boeing now.

You heard me right.

As someone who worked in the news business for nearly three decades, I've seen these kinds of media "feeding frenzies" take hold more times than I can count. They take on a life of their own - meaning that facts, logic and context can fall by the wayside.

And make no mistake: The grounding of the problem-plagued 787 "Dreamliner" fleet by the U.S. Federal Aviation Administration (FAA) and aviation authorities in other countries is turning into just such a media feeding frenzy - with The Boeing Co. (NYSE: BA) as the main course.

I'm referring to it as a feeding frenzy because the grounding was the culmination of 11 days of escalating, negative news coverage about the 787. The potential for battery fires was presented as the ultimate culprit, and the reason for the grounding order. But the stories that preceded that edict dealt with such unrelated issues as fuel leaks and a cracked windshield.

In other words, this firestorm has been stoked by non-expert journalists - each of them fixated on writing "a story," while not really understanding "the story."

That said, there is a safety issue here - one that Boeing badly mishandled by not getting out in front of. If we're handing out grades for crisis management, the U.S. aerospace giant gets an "F."

With that bit of background, let's take a look at what the Dreamliner crisis means for Boeing - both the company and the stock.
My reference point on this crisis is very different from what you'll see in the mainstream media, or even from Wall Street.

For one thing, as a onetime newsroom denizen, I know how misleading a crisis-inspired feeding frenzy like this can be. And as the co-author of the 1998 Prentice Hall book "Contrarian Investing: How to Buy and Sell When Others Won't and Make Money Doing it," I often find that when most investors are trembling with fear, I'm drooling over potential profits (with a gleam in my eyes, my wife has told me on many different occasions).

Boeing's stock has increased 21.5% since we recommended it to Private Briefing subscribers back on Sept. 28, 2011. Add in the dividends and the total return is 25%.

As I studied the company and its prospects over the last few days, I saw that many of the key reasons I recommended the stock in the first place continue to hold true ... which is why we still like Boeing today.

Here are seven facts to keep in mind as the Dreamliner saga continues to unfold:

■Revolutionary new products often experience rocky launches: Investors are currently lauding Airbus SAS - Boeing's arch-rival in the jetliner business - as the "good" and "well-run" airliner builder. How quickly they forget. The Airbus A380 - a complex-to-build but paradigm-shifting aircraft just like the Dreamliner - has experienced multiple delays of its own, leading to slower production, cancelled orders, compensation to customers and even the ouster of top executives. Once the airplane entered service, there were also some issues involving wing cracks, as well. The upshot: Although the A380 made its first flight in April 2005 and entered service in October 2007, only 92 of the jets have been delivered. And it sold only nine of the "superjumbo" airplanes last year.
■Boeing has the financial muscle to ride this out: Even if the company has to compensate its customers for lost revenue, it won't be a crushing blow. As of Sept. 30, Boeing had more than $10 billion in cash and short-term investments, and another $4.6 billion available via a revolving credit line. In fact, Standard & Poor's Ratings Services said the crisis won't affect Boeing's credit quality, meaning the ratings agency has no plans to change its credit assessment of the airplane company.
■In the near-term, Boeing's commercial airplane business is exceptionally healthy: As stock-market researcher noted in a recent investment note, the company's jetliner business "had a phenomenal 2012" - which bodes well for the next several years to come. You see, Boeing received 1,203 net orders last year - the second-highest-ever total. To keep from falling behind, the company boosted its production rates in order to deliver 601 commercial jets in 2012, a 26% increase from 2011. But even that wasn't enough to keep its backlog from rising to 4,373 commercial jets at the close of last year - the highest in Boeing's history. Since commercial jets account for 52% of the company's market value, that's a statistic you should be happy to see.
■In the long-term, global demand will keep Boeing and Airbus extremely healthy: In its newest "Current Market Outlook" - a forecasting document the company publishes every year - Boeing predicts that global carriers will need to buy 34,000 new commercial airplanes between now and 2031. That's $4.5 trillion worth of business. Air cargo, too, will continue to grow at a predictable rate in the decades to come. That gives investors the kind of long-term visibility they rarely get. As Boeing noted, the "commercial aviation [business] has weathered many downturns in the past. Yet recovery has followed quickly as the industry reliably returned to its long-term growth rate of approximately 5% per year. We expect this trend to continue over the next 20 years, with world passenger traffic growing 5% annually." Aerial freight delivery will grow, too, with Boeing noting that the "expansion of emerging-market economies will ... foster a growing need for fast, efficient transport of goods. We estimate that air cargo will grow 5.2% annually through 2031."
■The company is a dividend machine: When we recommended Boeing's shares to Private Briefing subscribers back in 2011, they were trading at $61.92 and were paying a quarterly dividend of 42 cents each - for a yield of 2.7%. Since that time, the company has boosted its dividend twice - first to 44 cents and then to 48.5 cents. That last increase - a bump of 10% - was announced in mid-December.
■The company is buying back shares: Incidentally, in addition to the dividend increase Boeing announced in December, it also said it would resume a stock-buyback program. As Private Briefing readers know, we much prefer dividend increases to buybacks, which are often just a way for the company to (usually only partially) offset its rich stock-option grants to executives. Boeing says it will buy back between $1.5 billion and $2 billion worth of its own stock in 2013 - in essence, part of the $3.6 billion that remains from a repurchase program that was authorized back in 2007. Boeing plans to start repurchasing shares after the release of its fourth-quarter results in late January.
■This isn't Boeing's first dance: In the middle 1930s, with the Great Depression still shackling the U.S. economy, the U.S Army Air Corps requested proposals for a multi-engine bomber. Boeing President Clairmont L. Egtvedt knew most companies would submit a twin-engine design. He pushed his designers to create something special - a four-engine aircraft. It was a huge risk: An earlier bomber had been leapfrogged by the paradigm-shifting Martin B-10 and a commercial design hadn't done well, either. With the economy so stressed, Egtvedt knew full well that a miscue here could bankrupt Boeing. But he thought it was worth the risk, and Boeing moved forward with its four-engine "299." The Air Corps would later reclassify it as the B-17 Flying Fortress - the bomber that helped defeat Hitler's Germany and win World War II.

That brings us to the bottom line: What's the outlook for Boeing's stock? Knowing how these news-story feeding frenzies tend to play out, I can almost guarantee that the tenor of the stories will get harsher, and the story darker, before it gets better. That will lead to concessions by Boeing, and perhaps some ousters both inside the company and at the FAA.

You can be just as certain that the stock will come under pressure.

But this is one strong company, and is a stock you want to own for the long haul. If you own it now, you can continue to hold it.

If you want to manage your risk level a bit, but don't want to sell the shares or risk getting "stopped out" via trailing stops, consider a plan where you add to your position a bit by averaging in at two or three progressively lower price points - which you establish now.

And don't forget: If the stock drops to $65, the dividend yield - currently 2.5% - jumps to 3%, a good metric for a blue chip stock.

If you don't own Boeing, but would like to, this is also a good way to establish an initial position - taking advantage of the weakness and short-sightedness of others to create a long-term profit play for yourself.

And if you'd like to join the thousands of investors we've already helped to make big money in the markets, just click here. We recently hit our first "triple" and have had three other recommendations double in our first year-and-a-half of existence, and that's just the start of our story.

And we bring this market intelligence to our members for just 26 cents a day.

Source :

Money Morning/The Money Map Report

©2013 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email:

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules