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Recent Sale: Boeing

Jun. 12, 2020 12:33 AM ETThe Boeing Company (BA)139 Comments


  • I exited my BA position at $229.75, locking in 69.4% profits.
  • Prior to my sale, BA shares were up roughly 50% during the last week alone.
  • This rally appears to be irrational and being that BA no longer pays a dividend, I was happy to take profits.
  • This idea was discussed in more depth with members of my private investing community, The Dividend Kings. Get started today »

After a long, and rather volatile journey, I have completely exited my position in Boeing (NYSE:BA).

In March, I had trimmed my BA stake at $121 and $158 in response to the company's dividend cut. And now, in early June, I sold the rest of my shares at $229.75, locking in profits of nearly 70%, due to the irrational nature of the recent rallies that I've seen in the broad markets and BA stock, specifically.

Boeing has been quite the roller-coaster of late, hitting all-time highs in the $450 area in early 2019. Then, the 737 Max disasters occurred, causing the stock to fall and trade in the $320-380 range throughout much of 2019.

Throughout this period of time, I remained bullish on BA. I thought that the 737 Max issue would play out in a similar fashion to the 787 battery fire issues that we saw back in 2013. My assumption was that a software fix would come relatively quickly, it wouldn't take long for the 737 Max to fly again, and the public would quickly move past the fears associated with the 737 Max brand (as the public is prone to do in today's fast-moving world).

Well, with the benefit of hindsight, I'll be the first to admit that I underestimated the scale and scope of the 737 Max issue for Boeing. Thankfully, during this period of time while I remained bullish, I stayed true to my asset allocation rules and did not add to an already overweight BA position.

Although during 2017 and 2018 BA established itself as the free cash flow king, I knew that at the end of the day, this was a company selling goods with hundred-million-dollar price tags and therefore, it would always have a certain degree of cyclicality attached due to economic sensitivity. This risk profile

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This article was written by

Nicholas Ward profile picture

Nicholas Ward is a Senior Investment Analyst with Wide Moat Research and the former editor-in-chief and portfolio manager at The Intelligent Dividend Investor, The Dividend Growth Club, and The Income Minded Millennial.

Nicholas is a contributor to the investing group The Dividend Kings where he shares analysis on dividend growth stocks. The Dividend Kings is a group of analysts, led by Dividend Sensei, that teach members how to invest more wisely in dividend stocks. The focus is on helping investors safeguard and grow their money in all market conditions through the highest-quality dividend investments. Features include: 13 model portfolios, buy ideas, company research reports, and a thriving chat community for readers looking to learn how to invest more intelligently in dividend stocks. Learn More.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in BA over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (139)

Probably a better entry point but I wouldn’t trade this stock
Huge barriers to entry
No meaningful competition
And US government will backstop
It regardless of which party wins.
If virus is defeated BA wins.
One major order and the stock rockets.
Focus on certification flight. Coming shortly.
nothing can go wrong... go wrong... go wrong...
It's to bad that the poor managem can't be fired. They do it to staff. Boeing needs a reboot
Nicholas Ward profile picture
Well, the CEO was let go. I agree they need an overhaul - I was disappointed to see them hire from within with regards to the new CEO.
GameBuzz profile picture
@Nicholas Ward “Meet the new boss. Same as the old boss.”
—The Who, “Won’t Get Fooled Again” 😁
Good1 profile picture
I sold off about half of my BA shares @ 320. 300% gain or something like that. There was just too much drama. I don't like drama stocks. Remaining shares have 87% unrealized cap gain. Not sure.. on what to do. Tempted to sell.

For me a bigger question is AMZN. 6 shares in at 32.00 = 7,754.03% unrealized cap gain. It seems to be in clover now - but maybe that's the time to sell. Never really liked the stock but it's been a growth monster.

Sort of wonder if AMZN is a big ponzi scheme.
Good1 profile picture
Acquired 09/26/2006 (AMZN) - when it was a book store
Nicholas Ward profile picture
Congrats on those AMZN profits! That's amazing. I am content to hold AMZN for the long-term, personally. I think they have a long growth runway.
hopeinsf profile picture
I would hold onto AMZN as well, and sell BA on the news, as the recent volatility shows, it can move quickly
Allen Greathouse profile picture
nice job nick, that company is a black hole. impossible to predict going forward. happy you locked in a profit.
Nicholas Ward profile picture
Yeah - the fact that forward earnings are negative and continue to be volatile makes this company very hard to evaluate, IMO. With that in mind, plus the lack of a dividend, meant that taking profits was fairly easy to do after the recent run-up.
Buyandhold 2012 profile picture
But, Nicholas, Boeing up by 11.52% so far today.
Nicholas Ward profile picture
It's still down significantly from where I sold. I'm still in the process of deciding if/when I want to buy it back lower.
2/3 sells were below where it trades now...
hopeinsf profile picture
also, sold almost all the shares above 210, after buying as low as 114, had a position before the crash too
sts66 profile picture
" it's worth noting that these gains are a far cry from the 250%+ gains that I was sitting on prior to BA's recent downfall"

That's why I always take at least my cost basis out when I hit 200%+ profits, sometimes do it at 100% gains depending on what the investment is, meaning a stock vs. a CEF.
Nicholas Ward profile picture
I love the idea of playing with the houses money; however, from a dividend growth perspective, I'm usually happy to simply buy and hold so long as the dividends continue to meet growth expectations. The downside to that situation is one like BA where the dividend is cut and the stock craters...but these situations are exceedingly rare. In 8 years of portfolio management, having owned 100 or so names, I've only ever experienced 4 dividend cuts (3 of which came during the COVID crisis).
Vandooman profile picture
Not a bad strategy but I often let great companies ride. As Peter Lynch once said, I don't understand why people cut the flowers and feed the weeds. I did sell half of Snap On recently due to a very large exposure, some tax loss carry forwards to eliminate tax on gains, and a bit of head scratching as to whether it was still a great company. Tax is a consideration in a taxable account. You only have the net proceeds to invest.
Because great companies can lose a ton of their gains...See XOM, GE, IBM, T, M...All were great and lost the majority of their gains
bengalesq profile picture
I agree. Bought at $95 and sold at $160 five days later. It's tough on a pop like that not to get too enamored with your pick - it becomes more precious than it had been when the world validates it so quickly. Took a few for me to come around on the notion that, when I bought it, if you had told me it would go up 60% on three years I would have been thrilled. 60% later in five days with no notable changes in the thesis means I have to sell. That valuation is no longer there given the uncertainty. You have to think this will come back down with the broader market. I will buy a small position again at around $100.
Nicholas Ward profile picture
In situations like that, I see nothing wrong with simply taking what the market gave you - great trade!
GameBuzz profile picture
I applaud your discipline. I have BA in my Roth so I have a 10-year time horizon but I still bought some more at 121 and sold that at 205, missing the top (tho still better than adding at 160 and selling at 150 like I did in March).
As crappy as the co. and mgt. have become, I just can’t see this administration (or the next, whoever and whenever that will be) allowing them to go belly up and switching the defense contracts to Airbus.
But I will sell some more when it gets back toward the 200dma. Good job!
Nicholas Ward profile picture
Thanks. Yeah, I don't see BA going belly up either - they're too important to the global aerospace industry.
hopeinsf profile picture
I have also exited most of BA, leaving a small portion for the 737 max certification news
Nicholas Ward profile picture
That was basically my plan as well, prior to the recent sale. However, the run-up to $230 inspired me to exit the position because I couldn't justify the premium.
CHORFa profile picture
The article is a good analysis. The whole industry is watching the real final outcome of Covid-19 . May fast take-off , may crash too .
Nicholas Ward profile picture
Yeah - this has become a very sensitive industry for sure - being that I think the entire rally off of the COVID-19 lows in March has been pretty irrational, I was pleased to take profits and bolster my cash a bit here.
A_Fava profile picture
Good work buying low and selling high. Based on my cost position, I had to sell for a loss and reinvested it in tech which has done well for me. You did the right thing. BA is still in trouble and that isn't changing regardless of irrational exhuberance.
Nicholas Ward profile picture
Thanks! It's always hard selling at a loss - I struggle with sometimes holding onto losers for too long because I'm usually stubbornly unwilling to do so. Your rotation into tech seems like a great idea - congrats!
Nicholas. I read with pleasure your analysis. Thanks for sharing it.
Nicholas Ward profile picture
Thanks for the comment - glad you enjoy my work!
Good morning, This is one of the best pieces you have ever written. Has nothing to do with BA, but you in the clearest detail explain buying low, selling off in pieces - not all at once, and then saying you might buy back in if prices continue to drop. This article could be a chapter of a book about stock ownership & management. And to think this was supposed to be dividend income, but it turned into banking stock price appreciation. "Taking what the market gives you", what a wonderful phrase. Nicely done and thank you.
Nicholas Ward profile picture
Such high praise - thanks so much! Yeah, at first, BA was all about dividend growth, but when things change in the markets, an investor has to change along with them. I wasn't pleased about the dividend cut, but I have been pleased with the profits that I've been able to lock in here with BA shares.
RoseNose profile picture
Thanks for sharing @Nicholas Ward your final decision to exit BA. I did so @ ~$300 and was upset with myself for waiting that long. I think many have made out nicely buying near $100 and dumping at $200. It could happen again. BA is one hugely troubled and poorly managed company, very sad to see it, as it has some really excellent products that deserve better.
I hope they can get it going / soaring again. Best always and TGIF! Rose :))
Nicholas Ward profile picture
Congrats Rose! With the benefit of hindsight, I certainly wish I would have sold out much closer to the recent highs. I was holding out hope that the 737 Max issues would be resolved and the dividend would be safe, but then COVID-19 came around and proved to be too much for this company (and just about every company in the aerospace industry).
I agree @228 BA has much to prove. but @170 very little. Defense on fire and finally news is MAX is moving forward to a certification flight . FAA Chief before Senate next week. Short of a virus shut down better days may now be ahead. BA can justify 200.
... and with vaccine: $300+
Nicholas Ward profile picture
I considered buying it all back yesterday in the $170 area - however I want to see where this negative momentum goes. We're up today obviously, but I think the overall market is still overvalued and due for a double digit drop. In this happens, BA will fall too.
Gary Kime profile picture

Like I said before I love your portfolio and your style, but I think you pull the sell trigger too quickly in general?
Nicholas Ward profile picture
Possibly - but when a dividend cut happens, I have very little reason to hold a stock any longer being that it no longer contributes to my primary goal. If BA was still paying a dividend, there is no doubt that I would still own shares.
Awesome bud, you locked in a short term cap gains tax too,. 70% profit.. more like 44% after you Pay all those taxes. Just stay long, this stuff will all be up significantly next year, do yourself a favor and hold then sell with a long term gain instead. This is not a look at me contest. We’re all up right now, locking In the quick profit at first sign of fear is easy, the real stones are on those who can stomach the volatility and hold on for higher less taxable gains.
Nicholas Ward profile picture
I've owned BA for years, so the gain is long-term. As I said in the piece, BA's dividend cut was the inspiration for the sale - I held onto my entire large position throughout the drop prior to the cut news because of my long-term bullish stance. However, when a dividend is cut, a stock no longer meets my portfolio's goals and therefore, it usually has to go.
as10675 profile picture
"...dividend cut was the inspiration for the sale - I held onto my entire large position throughout the drop prior to the cut news..."

The dividend makes many people wait and then finally sell at a low point.

Better I think to harvest some profits when stock is moving up, especially moving up fast.

Lighten up as stock starts down.

Don't buy back until stock is moving back up.

I own all kinds of stocks. From what I have been reading for 11 years here on SA is that many income only investors put far too much faith in the dividend and often in puny dividend growth. Waiting for a dividend cut to sell was a wait-too-long.
Sell deep ITM calls and you could have avoided short term capital gains well protecting a lot of downside and adding a little more profit
The Sublime Porte profile picture
LOL hilarious to see a Boeing permabull finally capitulate. This company has been a disaster for years and the only reason BA shares and your investment didn't go to zero is thanks to Jerome Powell. You should send him a thank you letter.

I made over $350,000 on a $5000 investment in Boeing puts in March. Now I'm playing both calls and puts (long term puts, short term calls). I think there is a good possibility this company goes under in the next year or two but it will be a struggle because politicians love Boeing.
Gary Kime profile picture
You seem to have all the answers? I’ll take your bet on whether BA goes under or not in the next year or two. That statement told me everything I need to know about your business IQ.
T'pee profile picture
I doubt it, despite all the mismanagement and double whammy bad luck Airbus and Boeing's customers are trapped, barriers to entry to this sector are massive, today perhaps even more so. No, Boeing is one of those companies that will continue to do ok over the long run, despite the unbelievable incompetence of its leadership team, something I suspect has now been corrected - the blunders that lead to the 737Max debacle will likely reverberate in company procedures for a long time, in a good way. No position but willing to consider at much lower prices. Good job for locking in solid profits @Nicholas Ward
Nicholas Ward profile picture
Yeah, I see no way that BA goes under - we're talking about an unprecedented economic environment here...no one could have foreseen a virus essentially shutting down the economy/air lines. The barriers to entry to this space are still extremely high and I suspect BA will be around for a very, very long time. Once the stock starts paying a dividend again, I'll be extremely happy to own it. And, as I said at the end of the piece, I may end up just buying the shares back in the short-term, dividend or not, due to the discount that the market has provided relative to my recent sale price.
A company that makes its money on products or services that are dependent on technologies that it develops itself, needs to spend a minimum of 25% of free cash flow on R&D. Something closer to 50% is more prudent if core technologies are significantly changing. When the required R&D investing for a company is not done over a period of two decades, all of its future potential will have been consumed.

Further, there are two very different classes of R&D investment. One is in the incremental improvement of existing products, and the other is in the development of more advanced products that provide better value for their customers. It's a combination of continuous improvement and leapfrogging its own products.

As we walk through Boeing's entire commercial and defense product lines, what do we see in terms of product ages, how much money has been spent on R&D, and what percentage of that spend has been on all new products? Further, if we look at what it is now selling and compare them to competitive offerings from other companies, what do we see? And, if we look at the length of the list of exciting new breakthrough products Boeing has that are well along in their development cycle, how many fingers do we need to count them? Is there even one?

The street may be able to bleed this once great company a little more. But now, it's more about wild swings in the stock price as the waves of the greater fool school of investing alternate between chasing the stock and running from it.
CD - not sure of your definitions, but how many of BA's dependent technologies do you think the OEM developed and sponsored itself, as opposed to adopting the fruit of R&D performed elsewhere, often at government (ie general public) expense? Or does your finger count provide the answer?
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