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Jim Van Meerten
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Jim Van Meerten is an advisor to Marketocracy Capital Management and writes on financial subjects here and on Barchart Portfolio Blogs and Seeking Alpha. He earned a BS in Accounting and Business Administration from Berry College; a Juris Doctorate from the Woodrow Wilson School of Law; and... More
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  • Boeing is in a stall 0 comments
    Oct 13, 2011 2:19 PM | about stocks: BA, LMT, NOC, AVAV, ERJ

    Lately the price of Boeing (BA) has been in a stall ant the stock is presently trading 20.63% off its 1 year high.  It's hard to call a Dow 30 component a speculative stock but the indecision coming out of Washington has made it so.  The company has 2 major divisions:  one makes commercial planes and is going strong, the other makes military aircraft and every bill in Washington today seems to have some rider that will cut defense spending.  This one year graph provided by Barchart shows the recent price stall:

     

     

     

    The Boeing Company (BA), together with its subsidiaries, engages in the design, development, manufacture, sale, and support of commercial jetliners, military aircraft, satellites, missile defense, human space flight, and launch systems and services worldwide. The company operates through five segments: Commercial Airplanes, Boeing Military Aircraft (NYSE:BMA), Network & Space Systems (N&SS), Global Services & Support (GS&S), and Boeing Capital Corporation (NYSE:BCC). 

     

    The Commercial Airplanes segment develops, produces, and markets commercial jet aircraft, as well as provides related support services to the commercial airline industry. It also offers aviation services support, aircraft modifications, spares, training, maintenance documents, and technical advice to commercial and government customers. 

     

    The BMA segment engages in the research, development, production, and modification of manned and unmanned military weapons systems for the global strike, mobility and surveillance, and engagement markets, as well as provides related services. 

     

    The N&SS segment involves in the research, development, production, and modification of products and services to assist its customers in transforming their operations through network integration, information, intelligence and surveillance systems, communications, architectures, and space exploration. 

     

    The GS&S segment offers logistics support functions for military platforms and operations. 

     

    The BCC segment facilitates, arranges, structures, and provides financing solutions for its commercial airplanes customers. Its financing portfolio consists of equipment under operating leases, finance leases, notes and other receivables, assets held for sale or re-lease, and investments. The company also engages in  engineering activities. The Boeing Company was founded in 1916 and is based in Chicago, Illinois.(Yahoo Finance profile)

     

    Factors to consider:

     

    Barchart technical indicators:

     

    • While the rest of the market seems to be in a slight recovery the sell indicators on BA are getting stronger and the buy signals are getting weaker
    • Barchart's technical price momentum indicators have this stock rated as a hold
    • The Trend Spotter indicates a  technical sell
    • Although the stock is above its 20 and 50 day moving average its still below its 100 day moving average
    • The price is 20.63% off its 1 year high
    • The Relative Strength Index is 52.75% and moving up slightly
    • Barchart computes a technical support level at 63.27
    • The stock recently traded at 63.29 with a 50 day moving average of 62.04
    Fundamental factors:
    • The biggest plus is the 3,330 commercial airplane back log of orders which is several years production
    • The biggest minus is the fear that Washington will continue to look at the defense budget as the best place to attack deficit spending
    • Wall Street brokerage analysts predict revenue will increase by 7.40% this year and another 13.70% next year
    • Estimates for earnings are a decrease of 4.70% this year, a reversal and increase by 22.60% next year and an overall annual increase of 13.17 for the next 5 years
    • With these consensuses the analysts issued 12 strong buy, 10 buy, 8 hold and no under perform recommendations
    • I must point out that in the past the earnings forecasts were wrong the majority of the time so I have to take the earnings projections with a grain of salt
    • The company enjoys an A+ financial strength rating
    • The 2.7% dividend seems solid and is only 30% of projected earnings
    General investor interest:
    • As measured on Motley Fool the individual investor is optimistic about this stock as an investment
    • Of 4,177 readers expressing an opinion 91% voted for the stock to beat the market
    • 94% of the more experienced All Stars voted for the same result
    • Fool notes that of the Wall Street columnist they follow 34 of the last 36 articles have been positive
    Competitors and sector leaders:
     
    When it comes to defense aircraft its competitors Lockheed (NYSE:LMT) has beaten the others  by being up 8% in the past year with Boeing (NYSE:BA) down 10% and Northrop Grumman (NYSE:NOC) down 12%:
     

     
     

     

     

    In the large commercial airlines Airbus is their competition.  Boeing is a member of the SIC 3721 aircraft sector and the sector price leader has been Aerovironment (NASDAQ:AVAV) up 30% for the last year, followed by Embraer-Empresa (NYSE:ERJ) and Boeing both off about 6% for the same period:

     

     

    Summary:  When I look at Boeing (BA) as an investment and notice it is a component of the Dow 30 it's hard for me to see it as a conservative, safe investment and deserving a place in every long term conservative portfolio.  I look at this as a speculative issue that will be a slave to the whims of Washington and where these unpredictable politicians will look for spending cuts.  Politics shouldn't drive our investment decision but for me I try to stay away from investments where revenue and profits are dependent on the good graces of Washington.  I'll pass on this stock.

     

     

    Jim Van Meerten is a Marketocracy Master

     

     

     

     

     

     

     

     



    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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