Author Topic: Boeing  (Read 3623 times)

magnet18

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Boeing
« on: March 11, 2020, 11:37:42 AM »
Just hit 50% lower than it's high, 20% of that from this recent dip, 30% from the bad press and their various issues. 


My equities are currently 100% indexes, but seeing a blue chip company 50% off is really taunting me to throw a few thousand of my cash at it.

Curious what others here think

YttriumNitrate

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Re: Boeing
« Reply #1 on: March 11, 2020, 11:56:21 AM »
Since only two companies in the world make big jets, Boeing's commercial side is definitely in the too big to fail category.

About half their profits come from the military, so peace (or a lack of willingness to spend big $$$ on a jet that's not ideal for the types of wars we've been fighting for the last 50 years) would be bad for business in the long term.

frugalnacho

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Re: Boeing
« Reply #2 on: March 11, 2020, 12:05:07 PM »
I keep laughing at all the people trying to time the market, and that think they can outsmart the market (which is comprised of millions of people smarter than them).

Then I see something like this and I think "wait, why is that so low? It seems so obvious that this is a great buy".  But then I think to myself that if it's so obvious and such a great buy...why is it still on sale for that price?  Why have MILLIONS of other people (many smarter than me) passed over this opportunity to buy up boeing for this steep discount?  If recovery and growth seems so sure, then why haven't more people bought in?  Or are we at price that the market collectively believes the stock is worth?

bwall

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Re: Boeing
« Reply #3 on: March 11, 2020, 12:30:56 PM »
Just hit 50% lower than it's high, 20% of that from this recent dip, 30% from the bad press and their various issues. 


My equities are currently 100% indexes, but seeing a blue chip company 50% off is really taunting me to throw a few thousand of my cash at it.

Curious what others here think
Until Boeing fixes it's 737-800 Max problem (going on two years now?) it's uninvestable. The current Covid-19 worries only just add to the pain.

Wait until they announce a fix and then jump in. Until then just watch it drop lower. It's already dropped 40%. If it drops 70% without a 737-800 Max fix, then and only then, you'll have a 'can't miss, whites-of-their-eyes' type moment.

Disclaimer: I cannot see the future. YMMV.

ChpBstrd

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Re: Boeing
« Reply #4 on: March 11, 2020, 12:42:16 PM »
Weíre only back to 2017 prices, but profits, revenues, and margins are much lower than they were then. From a valuation point of view, the price should be much lower.

v8rx7guy

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Re: Boeing
« Reply #5 on: March 11, 2020, 12:55:55 PM »
Just hit 50% lower than it's high, 20% of that from this recent dip, 30% from the bad press and their various issues. 


My equities are currently 100% indexes, but seeing a blue chip company 50% off is really taunting me to throw a few thousand of my cash at it.

Curious what others here think
Until Boeing fixes it's 737-800 Max problem (going on two years now?) it's uninvestable. The current Covid-19 worries only just add to the pain.

Wait until they announce a fix and then jump in. Until then just watch it drop lower. It's already dropped 40%. If it drops 70% without a 737-800 Max fix, then and only then, you'll have a 'can't miss, whites-of-their-eyes' type moment.

Disclaimer: I cannot see the future. YMMV.

Except the smarter people mentioned above will already have that priced in.

YttriumNitrate

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Re: Boeing
« Reply #6 on: March 11, 2020, 12:56:56 PM »
Why have MILLIONS of other people (many smarter than me) passed over this opportunity to buy up boeing for this steep discount?

While the average investor isn't going to be smarter than the fund manager that has a team of people analyzing Boeing non-stop, they can be more patient. It seems that many traders base their trades off expectations for the next 6 months (or next 6 seconds in some cases) while not caring much about the next six years.

magnet18

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Re: Boeing
« Reply #7 on: March 11, 2020, 01:00:26 PM »
737 max is supposed to be about 30% of their profit, and they're down 50% (dropped another 13% today)


Seems like some of what's being priced into the market is fear that they never announce a fix.  Given that the issues are computer related, rather than the fundamental design of the plane, and that they employ enough software and computer engineers to fill a city, and that they are one of only 2 companies in the world making big jets, that seems *extremely* unlikely.

I'm in a different aerospace sector, and the fact that it's taking 2 years to solve a problem doesn't seem at all surprising to me, aerospace is sssslllloooooooowwwwwwwww.  I've also been working a single, big issue for years.

Be greedy when others are fearful is ringing in my head.

That said, I obviously don't think it's a "can't miss" , as I'm sitting here posting and pondering this falling knife

frugalnacho

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Re: Boeing
« Reply #8 on: March 11, 2020, 01:18:09 PM »
Why have MILLIONS of other people (many smarter than me) passed over this opportunity to buy up boeing for this steep discount?

While the average investor isn't going to be smarter than the fund manager that has a team of people analyzing Boeing non-stop, they can be more patient. It seems that many traders base their trades off expectations for the next 6 months (or next 6 seconds in some cases) while not caring much about the next six years.

Even still there are millions of other investors out there that all have the opportunity to snatch up boeing at this great price, and certainly a good number of them are not thinking strictly about the next 6 seconds-6 months but are thinking longer term.  Which leads me to believe that maybe this isn't as great of a price as it seems to me.  What's more likely, that I can spot a tremendous deal on a stock even though I have no formal business/analyst education/training, or I am missing some part of the equation? As infallible as I believe I am, I'm inclined to think maybe EVERYONE else in aggregate has more knowledge than me. 

I've read a lot of books and a lot of blogs that have drilled it into me that I am not smarter than the market, and that I cannot accurately time the market, and that I cannot pick winning stocks.  I have internalized all that, and I fully believe it. I have done mock investments to test that theory, and it's pretty accurate - I could not beat the market. I have drunk the kool aid of investing in index funds and simply riding the entire market with minimal expenses to the point I actively try to get other people to drink the kool aid also.

I remember one time thinking that gas and oil prices had plummeted relative to the rest of the market, and that it was so obvious that they were under priced and I should really invest in because it seemed like such a smart move.  I hemmed and hawed, but eventually decided I was fooling myself and I didn't know any better than the market, and I should just stick to my plan which was to always blast forward with index funds.  In retrospect it was the right move.  I'm having similar feelings to some individual stocks or sectors right now.  It seems so obvious that they will recover and be good investments, but I don't know shit and should just stick to my plan. 

bwall

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Re: Boeing
« Reply #9 on: March 11, 2020, 01:44:36 PM »
The people and the 'smart money' have all the information priced in, until they don't. If you have an edge, then you can absolutely beat the market. Most people don't know what their edge is, though. Or have the discipline to trade. So, they are better off indexing. As so often in life, the answer is to know thyself.

Through work, for example, I know that 3M products are in crazy high demand now b/c of Covid-19. This isn't high demand like the toilet paper shortage, where the demand is just brought forward, but real demand. People who've never used 3m masks or protective gear before will use it now and then dispose of it. Increased demand, yet they're down 20%. The markets have it wrong due to indiscriminate selling.

Also; cruise lines are going to get hit, and hit hard. That was a great short opportunity (or Put buying) last week. Why didn't the smart money price it in last week if they're so smart? What new event has happened over the last five days to cause cruise line stocks to drop by 50% since last Friday? Nothing that wasn't already known on Friday.  Reason: the market isn't so smart. Or very good at 'pricing in' information. There is no 'perfect' market in this sense.

Biotechs and biopharma have all kinds of opportunity even today, b/c the 'smart-money' whizzes don't understand what they do. And the ones who do understand biotech and biopharma don't understand markets. Can hedge funds hire scientists to explain the technology to them? Sure, and I know they do. But, not enough to make the market 'price-in' all the information.

Also, lots of time it's just plain laziness that keeps the people from 'pricing in' the market changes. People see stocks on the ticker tape as a roulette wheel and forget the underlying company, whose performance drives the stock price.

So, yeh, if you're like the OP and say on the cusp of a bear market 'Great DOW component down 40%, it must be a bargain!', then, yeh, you'll pay a lot to learn the lessons of the market. Much better to follow the advice of @ChpBstrd  and be patient and wait for the new lower earnings to be priced in. It takes a lot of work (and time) to get this sense of valuation, etc. that ChpBstrd is talking about. I enjoy doing this and suspect that others do as well, but if you don't enjoy doing it, then indexing is the best solution.

bwall

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Re: Boeing
« Reply #10 on: March 11, 2020, 02:02:26 PM »
If anyone still subscribes to the 'efficient market' theory of all information being 'priced in' to a stock, then I'd suggest reading "The Smartest Guys in the Room" by McLain or "Bad Blood" by Carreyou, or "The Big Short" by Lewis

Both books talk about the collapse of companies/markets both large and small. And the numerous warning signs that should have been priced in, but weren't. Until the moment they were priced in. In between those moments, there is ample opportunity for a sharp-eyed person to make money.

There's even a saying that directly contradicts the 'efficient market' hypothesis that goes back decades; "Markets can remain irrational longer than you can remain solvent."

fattest_foot

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Re: Boeing
« Reply #11 on: March 11, 2020, 03:17:00 PM »
737 max is supposed to be about 30% of their profit, and they're down 50% (dropped another 13% today)


Seems like some of what's being priced into the market is fear that they never announce a fix.  Given that the issues are computer related, rather than the fundamental design of the plane, and that they employ enough software and computer engineers to fill a city, and that they are one of only 2 companies in the world making big jets, that seems *extremely* unlikely.

I'm in a different aerospace sector, and the fact that it's taking 2 years to solve a problem doesn't seem at all surprising to me, aerospace is sssslllloooooooowwwwwwwww.  I've also been working a single, big issue for years.

Be greedy when others are fearful is ringing in my head.

That said, I obviously don't think it's a "can't miss" , as I'm sitting here posting and pondering this falling knife

The problems with the Max aren't contained to just that platform though. They're symptoms of bigger problems within the company.

I wouldn't touch Boeing stock. If I could somehow dump them from my index funds, I would.

magnet18

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Re: Boeing
« Reply #12 on: March 12, 2020, 07:33:32 AM »
Just hit 50% lower than it's high, 20% of that from this recent dip, 30% from the bad press and their various issues. 


My equities are currently 100% indexes, but seeing a blue chip company 50% off is really taunting me to throw a few thousand of my cash at it.

Curious what others here think
Until Boeing fixes it's 737-800 Max problem (going on two years now?) it's uninvestable. The current Covid-19 worries only just add to the pain.

Wait until they announce a fix and then jump in. Until then just watch it drop lower. It's already dropped 40%. If it drops 70% without a 737-800 Max fix, then and only then, you'll have a 'can't miss, whites-of-their-eyes' type moment.

Disclaimer: I cannot see the future. YMMV.

And it just cratered on down to $159, 65% from the all time high

That 70% moment may be coming very soon



Do I think Boeing has systematic issues?  Probably.
Do I think Boeing will actually crash down to being worth 30% of what they were worth a year ago? No.  Not at all.

flipboard

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Re: Boeing
« Reply #13 on: March 12, 2020, 08:48:51 AM »
Since only two companies in the world make big jets, Boeing's commercial side is definitely in the too big to fail category.

About half their profits come from the military, so peace (or a lack of willingness to spend big $$$ on a jet that's not ideal for the types of wars we've been fighting for the last 50 years) would be bad for business in the long term.
Not only that, but the US Government wouldn't let Boeing fail. Although there's no guarantee that the solution would be good for Boeing investors, most likely it would be.

MaaS

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Re: Boeing
« Reply #14 on: March 12, 2020, 09:06:09 AM »
If anyone still subscribes to the 'efficient market' theory of all information being 'priced in' to a stock, then I'd suggest reading "The Smartest Guys in the Room" by McLain or "Bad Blood" by Carreyou, or "The Big Short" by Lewis

Both books talk about the collapse of companies/markets both large and small. And the numerous warning signs that should have been priced in, but weren't. Until the moment they were priced in. In between those moments, there is ample opportunity for a sharp-eyed person to make money.

There's even a saying that directly contradicts the 'efficient market' hypothesis that goes back decades; "Markets can remain irrational longer than you can remain solvent."

Well said and agree.

"Everything is priced in" is catchy and sounds reasonable on the surface, but it's just not true.

The biggest thing is investing time horizons. Active managers need to beat the market to retain clients for the next quarter. Thus, they must think short-term. Disney would be an insane pick for an active manager right now.

But for somebody with a 20-year time horizon? Huge opportunity.

magnet18

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Re: Boeing
« Reply #15 on: March 16, 2020, 04:16:09 AM »
If it drops 70% without a 737-800 Max fix, then and only then, you'll have a 'can't miss, whites-of-their-eyes' type moment.

Disclaimer: I cannot see the future. YMMV.

Set to open down 66%!
Think ill set a limit order for a couple shares, we'll see what happens

bwall

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Re: Boeing
« Reply #16 on: March 16, 2020, 04:27:05 AM »
If it drops 70% without a 737-800 Max fix, then and only then, you'll have a 'can't miss, whites-of-their-eyes' type moment.

Disclaimer: I cannot see the future. YMMV.

Set to open down 66%!
Think ill set a limit order for a couple shares, we'll see what happens

Don't.

The bear market has just started. It's going to be awhile until we get to the bottom. I now expect Boeing to drop below $100.

Blueberries

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Re: Boeing
« Reply #17 on: March 16, 2020, 06:47:59 AM »
I keep laughing at all the people trying to time the market, and that think they can outsmart the market (which is comprised of millions of people smarter than them).

Then I see something like this and I think "wait, why is that so low? It seems so obvious that this is a great buy".  But then I think to myself that if it's so obvious and such a great buy...why is it still on sale for that price?  Why have MILLIONS of other people (many smarter than me) passed over this opportunity to buy up boeing for this steep discount?  If recovery and growth seems so sure, then why haven't more people bought in?  Or are we at price that the market collectively believes the stock is worth?

I'm not speaking to BA, but....  Ray Dalio has more smarts in his eyelashes than I have in my whole body, but I've been in cash for a handful of weeks now (with a positive year so far) and he screwed up.  People who are smarter than us get it wrong all the time, which is why I actively avoid listening to expert opinions on current market conditions.  It's too easy to find yourself a victim of groupthink.

https://www.cnbc.com/2020/03/15/even-bridgewater-associates-was-caught-flat-footed-by-the-coronavirus-market-sell-off.html

magnet18

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Re: Boeing
« Reply #18 on: March 16, 2020, 07:14:14 AM »
If it drops 70% without a 737-800 Max fix, then and only then, you'll have a 'can't miss, whites-of-their-eyes' type moment.

Disclaimer: I cannot see the future. YMMV.

Set to open down 66%!
Think ill set a limit order for a couple shares, we'll see what happens

Don't.

The bear market has just started. It's going to be awhile until we get to the bottom. I now expect Boeing to drop below $100.

You really think it's gonna hit 80% down from a year ago?

I'll be happy to buy a couple shares at 68% down.  I'm slowly dollar cost averaging into this market anyway.

ETA
Interesting
https://www.fool.com/investing/2020/03/15/should-you-buy-boeing-stock-right-now.aspx
« Last Edit: March 16, 2020, 07:22:12 AM by magnet18 »

bwall

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Re: Boeing
« Reply #19 on: March 16, 2020, 07:22:41 AM »
If it drops 70% without a 737-800 Max fix, then and only then, you'll have a 'can't miss, whites-of-their-eyes' type moment.

Disclaimer: I cannot see the future. YMMV.

Set to open down 66%!
Think ill set a limit order for a couple shares, we'll see what happens

Don't.

The bear market has just started. It's going to be awhile until we get to the bottom. I now expect Boeing to drop below $100.

You really think it's gonna hit 80% down from a year ago?

I'll be happy to buy a couple shares at 68% down.  I'm slowly dollar cost averaging into this market anyway.
Right now, pre-market, it's trading below $149 and DOW futures point to a drop more than 1000 points at the open.

I think that anything is possible. The bear market is here and the travel sector is generally a leading economic indicator. Lots of people are not traveling, canceling trips, etc, which means the airlines will lose money, which will decrease demand for airplanes. On the positive side, it will reduce the pressure on Boeing to solve it's 737-800 Max problem.

Generally when we enter a bear market, they last for more than just a couple of weeks.

I can't tell anyone how to trade, but my feeling is that the market will be lower in seven days than it is right now; DOW at 23,185 before the open. Boeing is a DOW component, FWIW.




bwall

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Re: Boeing
« Reply #20 on: March 17, 2020, 08:39:28 AM »
Boeing now at $105, interlay low at $101.

Thoughts?

v8rx7guy

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Re: Boeing
« Reply #21 on: March 17, 2020, 08:46:17 AM »

frugalnacho

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Re: Boeing
« Reply #22 on: March 17, 2020, 09:06:39 AM »
Boeing now at $105, interlay low at $101.

Thoughts?

I think it was around $190 when I posted this:

Why have MILLIONS of other people (many smarter than me) passed over this opportunity to buy up boeing for this steep discount?

While the average investor isn't going to be smarter than the fund manager that has a team of people analyzing Boeing non-stop, they can be more patient. It seems that many traders base their trades off expectations for the next 6 months (or next 6 seconds in some cases) while not caring much about the next six years.

Even still there are millions of other investors out there that all have the opportunity to snatch up boeing at this great price, and certainly a good number of them are not thinking strictly about the next 6 seconds-6 months but are thinking longer term.  Which leads me to believe that maybe this isn't as great of a price as it seems to me.  What's more likely, that I can spot a tremendous deal on a stock even though I have no formal business/analyst education/training, or I am missing some part of the equation? As infallible as I believe I am, I'm inclined to think maybe EVERYONE else in aggregate has more knowledge than me. 

I've read a lot of books and a lot of blogs that have drilled it into me that I am not smarter than the market, and that I cannot accurately time the market, and that I cannot pick winning stocks.  I have internalized all that, and I fully believe it. I have done mock investments to test that theory, and it's pretty accurate - I could not beat the market. I have drunk the kool aid of investing in index funds and simply riding the entire market with minimal expenses to the point I actively try to get other people to drink the kool aid also.

I remember one time thinking that gas and oil prices had plummeted relative to the rest of the market, and that it was so obvious that they were under priced and I should really invest in because it seemed like such a smart move.  I hemmed and hawed, but eventually decided I was fooling myself and I didn't know any better than the market, and I should just stick to my plan which was to always blast forward with index funds.  In retrospect it was the right move.  I'm having similar feelings to some individual stocks or sectors right now.  It seems so obvious that they will recover and be good investments, but I don't know shit and should just stick to my plan.

In retrospect I was missing a huge part of the equation and had no idea it would continue to drop like this.  This is a drastic drop, even relative to the entire market.  Glad I listened to my smart brain and not my gut.  Brain: 1, Gut:0

Although NOW my gut is telling me this is a great price and I should get in on this action!

bwall

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Re: Boeing
« Reply #23 on: March 17, 2020, 10:06:31 AM »
Boeing now at $105, interlay low at $101.

Thoughts?

I think it was around $190 when I posted this:


In retrospect I was missing a huge part of the equation and had no idea it would continue to drop like this.  This is a drastic drop, even relative to the entire market.  Glad I listened to my smart brain and not my gut.  Brain: 1, Gut:0

Although NOW my gut is telling me this is a great price and I should get in on this action!
Slight editing above on my part.


This is where it gets tricky for me. I have no idea what will come next. As I type Boeing is just a hair under $113. This is a lot closer to fair market value than one week ago, or even yesterday. And I watched it go from $105 to $113. Is this the right time to pull the trigger? Dunno.

Upthread I said don't invest with the current 737-800 MAX problem still unsolved. That hasn't gone away and won't for awhile. I also said the bear market has just started, and this is still true. So, I guess I still have to stand by my other comment of 'wait until it drops below $100.' Because if my original thesis has gotten this far, then there's no reason to think it not still intact. Therefore, it looks like it's going to drop some more.

I bet lots of algorithms say 'sell' and need to be reprogrammed for a bear market. This might take awhile.

ChpBstrd

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Re: Boeing
« Reply #24 on: March 17, 2020, 11:51:27 AM »
Boeing and the travel/leisure industry are a massive bet that we will have a recession and not a depression. If we have a depression, itís bankruptcy for them all. Even in the recession scenario, many companies in the travel industry will still go bankrupt.

This is akin to buying bank stocks during the Great Recession vs Great Depression. One outcome makes you rich. The other wipes you out.

magnet18

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Re: Boeing
« Reply #25 on: March 17, 2020, 02:44:37 PM »
Boeing and the travel/leisure industry are a massive bet that we will have a recession and not a depression. If we have a depression, itís bankruptcy for them all. Even in the recession scenario, many companies in the travel industry will still go bankrupt.

This is akin to buying bank stocks during the Great Recession vs Great Depression. One outcome makes you rich. The other wipes you out.

Boeing is a huge part (50%+) government/defense work

JetBlast

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Re: Boeing
« Reply #26 on: March 17, 2020, 03:16:29 PM »
737 max is supposed to be about 30% of their profit, and they're down 50%

The problems are more than simply not selling MAX.  First is massive compensation due to airlines for aircraft they can't fly.  They took a $5 billion write off, but the cash hasn't all been paid yet.  Second, the 737 line is their big cash flow driver.  While margins are better on the 787 and 777, the volume of the 737 is a huge part of Boeing's cash flow.  Boeing's delivery target on the 737MAX for this summer was 57 aircraft per month.  That's a lot of cash flow they're currently missing, while they spend massive amounts of money re-engineering the MAX.  They also have a cash drain as the 777X project ramps up and nears certification.  The big engineering on that is likely done, but they have the flight test program and any redesign from that, along with changing the manufacturing and supply chain from the older 777 to the new generation.

And that was a week and a half ago.  Now they have massive levels of customer deferrals, as airlines worldwide look to push back deliveries and conserve cash until coronavirus blows over.  Nobody wants delivery of a $150 million 787-9 right now.  In a filing this afternoon, Boeing revealed that they've drawn the ENTIRE $13.4 billion line of credit they arranged a little over a month ago.  That gives some idea of the cash they are burning.
« Last Edit: March 17, 2020, 03:31:46 PM by JetBlast »

magnet18

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Re: Boeing
« Reply #27 on: March 17, 2020, 08:00:46 PM »
Yep, I'm understanding they were probably overvalued to begin with
Glad I didn't buy at $200
Glad I didn't buy at $135

Maybe if it hits $80 I'll buy a few shares

Till then I think I'll stick to vtsax

JetBlast

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Re: Boeing
« Reply #28 on: March 17, 2020, 08:47:26 PM »
Yep, I'm understanding they were probably overvalued to begin with
Glad I didn't buy at $200
Glad I didn't buy at $135

Maybe if it hits $80 I'll buy a few shares

Till then I think I'll stick to vtsax

Why $80? 

magnet18

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Re: Boeing
« Reply #29 on: March 17, 2020, 09:08:07 PM »
Yep, I'm understanding they were probably overvalued to begin with
Glad I didn't buy at $200
Glad I didn't buy at $135

Maybe if it hits $80 I'll buy a few shares

Till then I think I'll stick to vtsax

Why $80?

Completely arbitrarily cheap number

I still don't think Boeing is going bankrupt now any more than GM went bankrupt in the GFC

$80 is 80% down from it's all time high, and so cheap it becomes my arbitrary "screw it, why not" level


Talking fun money, to be clear, not serious portfolio

bwall

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Re: Boeing
« Reply #30 on: March 18, 2020, 03:49:42 AM »

Why $80?

Completely arbitrarily cheap number

I still don't think Boeing is going bankrupt now any more than GM went bankrupt in the GFC

GM did go bankrupt in 2009. All the GM stock held at the time went to zero. The current shareholders of GM had to buy back in with their money with an IPO in 2010.

magnet18

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Re: Boeing
« Reply #31 on: March 18, 2020, 04:26:31 AM »

Why $80?

Completely arbitrarily cheap number

I still don't think Boeing is going bankrupt now any more than GM went bankrupt in the GFC

GM did go bankrupt in 2009. All the GM stock held at the time went to zero. The current shareholders of GM had to buy back in with their money with an IPO in 2010.

Nevermind, i had a dumb

MustacheAndaHalf

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Re: Boeing
« Reply #32 on: March 18, 2020, 07:13:27 AM »
I just heard on CNBC that Boeing raise money by offering bonds - nobody considers Boeing investment grade.  Boeing is asking the U.S. government for $60 billion in aid, to keep them afloat.  Is this a situation like Bear Sterns?

"... and Bear Stearns would be purchased by JPMorgan Chase in a stock swap worth $2 a share, or less than 7 percent of Bear Stearns' market value just two days before ..."
https://en.wikipedia.org/wiki/Bear_Stearns#Fed_bailout_and_sale_to_JPMorgan_Chase

On the positive side, Boeing is critical to the airline industry and to national defense.  The majority of that aid would go to the supply chain that depends on Boeing, which rescues a lot of jobs.  Letting Boeing fail immediately cascades to other suppliers that must wait to see how its resolved.

Boll weevil

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Re: Boeing
« Reply #33 on: March 18, 2020, 10:03:58 AM »
First off, the MAX series are the 737-7, 737-8, 738-9, and 737-10. The 737-700, -800, and -900 are members of the NG series and are still flying.

Second, I donít think Boeing blew through the whole $13.8B in a month. They did draw it, but the majority of the money is still probably sitting in a bank account somewhere. If they only drew on it as they needed it, thereís a chance that the lenders would at some point withdraw the loan which would leave the company in deep trouble. Itís better to borrow the money and not need it than to need the money and find out the lender is no longer willing to lend it.

Third, Buffett says to buy companies with a big moat, and designing airplanes is a GIANT moat. Twelve years ago Mitsubishi announced the MRJ (now known as SpaceJet), after several missteps, itís still in work and theyíre hoping to deliver in 2022. Around the same time, Bombardier announced the CSeries. While it is in service, it financially broke the company and the design was sold off to Airbus, who now calls it the A220.  Both of those planes are much smaller than the 737.  Boeing itself botched the early stages of the 787 and is still fixing issues with the KC-46, which is based on the 767.

All that being said, I donít know where the bottom is, and thereís no guarantee they donít declare bankruptcy. Depending on how things go, I could also see them being bought by Berkshire Hathaway (who supposedly is sitting on >$128B; as I write this, Boeingís market cap is ~$56B) or some other group with similarly deep pockets.

Iíd say itís a gamble, treat it as such.

ChpBstrd

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Re: Boeing
« Reply #34 on: March 18, 2020, 10:05:30 AM »
On the positive side, Boeing is critical to the airline industry and to national defense.  The majority of that aid would go to the supply chain that depends on Boeing, which rescues a lot of jobs.  Letting Boeing fail immediately cascades to other suppliers that must wait to see how its resolved.

For big businesses, bankruptcy is a legal maneuver, not necessarily a closure of the business or liquidation of its assets. As with GM, a "restructuring" could be announced and shareholders could wake up one morning holding shares with no value. Meanwhile, the factories would keep running.

JetBlast

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Re: Boeing
« Reply #35 on: March 18, 2020, 10:46:11 AM »

Second, I donít think Boeing blew through the whole $13.8B in a month. They did draw it, but the majority of the money is still probably sitting in a bank account somewhere. If they only drew on it as they needed it, thereís a chance that the lenders would at some point withdraw the loan which would leave the company in deep trouble. Itís better to borrow the money and not need it than to need the money and find out the lender is no longer willing to lend it.


Exactly.  That's why companies like United Airlines and Carnival Cruise Lines drew their entire lines.  They're worried credit markets will make it impossible to draw unused lines later.  Boeing probably still has a big chunk of the cash, but the burn rate must be quite alarming right now with deferrals and cancellations.


Third, Buffett says to buy companies with a big moat, and designing airplanes is a GIANT moat. Twelve years ago Mitsubishi announced the MRJ (now known as SpaceJet), after several missteps, itís still in work and theyíre hoping to deliver in 2022. Around the same time, Bombardier announced the CSeries. While it is in service, it financially broke the company and the design was sold off to Airbus, who now calls it the A220.  Both of those planes are much smaller than the 737.  Boeing itself botched the early stages of the 787 and is still fixing issues with the KC-46, which is based on the 767.

All that being said, I donít know where the bottom is, and thereís no guarantee they donít declare bankruptcy. Depending on how things go, I could also see them being bought by Berkshire Hathaway (who supposedly is sitting on >$128B; as I write this, Boeingís market cap is ~$56B) or some other group with similarly deep pockets.


I had this thought as well, but one thing Berkshire says is that they can't provide the management.  Do they trust management at Boeing to get it right?

Boeing hasn't really gotten anything right since the 777-300ER.  The cost overruns and penalties from the 787 were $30 billion.  The rollout had fastens from Home Depot!  And it had a grounding for battery fires.  The 737MAX issues have been beaten to death, and the A321NEO is clearly in the sweet spot of the narrow body market.  The 777X is now late.  Airbus has also jumped them in the opportunity for a small narrow body with the A220 purchase. 

Berkshire could take on Boeing, but I don't know if they want to.  I agree with you that Boeing is a gamble at this point.


MustacheAndaHalf

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Re: Boeing
« Reply #36 on: March 18, 2020, 01:34:04 PM »
If you can rule out Boeing just going into limbo for a year or two, there's another way to look at this.  A bankruptcy is a total loss of any stock investment.  Since you'll lose it all anyways, why not buy options instead?  The option may expire worthless - but that's the same expected risk as owning the stock.  So instead of purchasing Boeing shares, you buy call options near the current price, and have the option to buy double the number of shares.

If a bailout rescues the stock, and production resumes, your options pay out far better than the stock.
If the company goes under, both options and stock become worthless.

BUT if the company stays at the same price for 2 years, the stock retains it's value while the options expire worthless (-100% loss).  Normally the odds for that are quite good, so this better be very unlikely if you want to use options instead of buying shares.

Note I have no experience with options, and I don't have any on Boeing as I'm writing this.  So make your own.. "call".

bwall

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Re: Boeing
« Reply #37 on: March 18, 2020, 04:39:30 PM »
Boeing closed today at $101. Inter day low of $90. Down from over $300 just a month ago.

bwall

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Re: Boeing
« Reply #38 on: March 18, 2020, 04:46:36 PM »
If you can rule out Boeing just going into limbo for a year or two, there's another way to look at this.  A bankruptcy is a total loss of any stock investment.  Since you'll lose it all anyways, why not buy options instead?  The option may expire worthless - but that's the same expected risk as owning the stock.  So instead of purchasing Boeing shares, you buy call options near the current price, and have the option to buy double the number of shares.

If a bailout rescues the stock, and production resumes, your options pay out far better than the stock.
If the company goes under, both options and stock become worthless.

BUT if the company stays at the same price for 2 years, the stock retains it's value while the options expire worthless (-100% loss).  Normally the odds for that are quite good, so this better be very unlikely if you want to use options instead of buying shares.

Note I have no experience with options, and I don't have any on Boeing as I'm writing this.  So make your own.. "call".

Good point.
June 2022 at the money call options are trading for $50. So, for $5000 you can control 100 shares vs 50 shares if you bought the common stock. You could make twice the profit with the same money. But, BA's got only two years to figure it all out.

I'd rather accept less risk (and profit) and just buy the common stock. If the price of an at-the-money call were only $30, though. . .. .. .I might be tempted.




John Galt incarnate!

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Re: Boeing
« Reply #39 on: March 18, 2020, 05:17:13 PM »
Just hit 50% lower than it's high, 20% of that from this recent dip, 30% from the bad press and their various issues. 


My equities are currently 100% indexes, but seeing a blue chip company 50% off is really taunting me to throw a few thousand of my cash at it.

Curious what others here think

In general, I think individual   stocks and indexes are on sale when they are -50% from their highs.




johndoe

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Re: Boeing
« Reply #40 on: March 25, 2020, 08:44:48 PM »
Well I hope for your sakes you bought on 3-23, because it looks like BA went up ~65% in TWO DAYS?!

magnet18

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Re: Boeing
« Reply #41 on: March 26, 2020, 08:26:02 AM »
Well I hope for your sakes you bought on 3-23, because it looks like BA went up ~65% in TWO DAYS?!

As a matter of fact I did!!
My one and only share! Lol

bwall

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Re: Boeing
« Reply #42 on: May 04, 2020, 06:53:45 PM »
If you can rule out Boeing just going into limbo for a year or two, there's another way to look at this.  A bankruptcy is a total loss of any stock investment.  Since you'll lose it all anyways, why not buy options instead?  The option may expire worthless - but that's the same expected risk as owning the stock.  So instead of purchasing Boeing shares, you buy call options near the current price, and have the option to buy double the number of shares.

If a bailout rescues the stock, and production resumes, your options pay out far better than the stock.
If the company goes under, both options and stock become worthless.

BUT if the company stays at the same price for 2 years, the stock retains it's value while the options expire worthless (-100% loss).  Normally the odds for that are quite good, so this better be very unlikely if you want to use options instead of buying shares.

Note I have no experience with options, and I don't have any on Boeing as I'm writing this.  So make your own.. "call".

Good point.
June 2022 at the money call options are trading for $50. So, for $5000 you can control 100 shares vs 50 shares if you bought the common stock. You could make twice the profit with the same money. But, BA's got only two years to figure it all out.

I'd rather accept less risk (and profit) and just buy the common stock. If the price of an at-the-money call were only $30, though. . .. .. .I might be tempted.

Six weeks later and BA has reported earnings already and the stock has traded flat for the past month (or so).

June 2022 $100 calls are worth $60, so a nice 20% gain in six weeks. Stock has gone from $101 to $131, about a 30% gain in the same amount of time, with no worry about time decay.

In the meantime, who wants to get into an airplane already?

Place your bets and take your chances accordingly.

MustacheAndaHalf

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Re: Boeing
« Reply #43 on: May 05, 2020, 02:50:39 AM »
bwall - To be clear, I didn't buy options in Boeing and don't plan to now at higher prices.  If a vaccine arrives before Jan 2022, and the world resumes air travel like nothing happened, then Boeing's recovery seems very likely.  It's an open question when COVID-19 ends, thus the risk.

I was really surprised Warren Buffet bought zero shares of Boeing during the crisis.  Aren't there only 2 airplane makers in the world?  The U.S. air force isn't going to buy fighter jets from Europe and China, which is a unique "moat" for Boeing.

Not only that, Buffet sold his airline stocks.  From what I read, Buffet believes there is a possibility that U.S. stocks fall and don't recover for a decade or two... a possibility.  Until he can rule it out, he doesn't see any opportunities.  He's exiting the airline industry, which I suppose counts as a negative view on Boeing.

bwall

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Re: Boeing
« Reply #44 on: May 05, 2020, 06:42:20 AM »
I wasn't trying to be confrontation or single anyone out by posting. My intent was just to document how options move. In the space of six weeks, the stock increased 30%, yet the options lagged that performance.

I also find it interesting the Buffet prefers cash to shares in BA.

Boeing will be a screaming buy again. But, until they are, they aren't.


Telecaster

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Re: Boeing
« Reply #45 on: May 06, 2020, 12:15:54 PM »
Not only that, Buffet sold his airline stocks.  From what I read, Buffet believes there is a possibility that U.S. stocks fall and don't recover for a decade or two... a possibility.  Until he can rule it out, he doesn't see any opportunities.  He's exiting the airline industry, which I suppose counts as a negative view on Boeing.

He said basically that the airlines will need to borrow vast amounts of money to survive, and that money has to be paid back out of future earnings.  As air travel returns it will be incremental.  In the mean time though, the airlines are saddled with extra planes.

He did mention Boeing specifically in relation to Precision Cast Parts (a Berkshire company and Boeing supplier).   Basically he said that it is unknown how many new planes will be needed, and at what future time they will be needed. 

MustacheAndaHalf

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Re: Boeing
« Reply #46 on: May 07, 2020, 04:21:37 AM »
I wasn't trying to be confrontation or single anyone out by posting. My intent was just to document how options move. In the space of six weeks, the stock increased 30%, yet the options lagged that performance.
Okay, no problem.  I also posted to make sure people know I did not buy options on Boeing, and have no plans to do so.


Not only that, Buffet sold his airline stocks ... He's exiting the airline industry, which I suppose counts as a negative view on Boeing.
... the airlines are saddled with extra planes.

He did mention Boeing specifically in relation to Precision Cast Parts (a Berkshire company and Boeing supplier).   Basically he said that it is unknown how many new planes will be needed, and at what future time they will be needed. 
Although it depends on Congress, Boeing could also ask for more defense contracts now, when air travel is shut down.  Government loans are probably needed no matter what, but even better is purchasing fighters and military helicopters from Boeing.

beltim

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Re: Boeing
« Reply #47 on: May 07, 2020, 05:19:34 AM »
If you can rule out Boeing just going into limbo for a year or two, there's another way to look at this.  A bankruptcy is a total loss of any stock investment.  Since you'll lose it all anyways, why not buy options instead?  The option may expire worthless - but that's the same expected risk as owning the stock.  So instead of purchasing Boeing shares, you buy call options near the current price, and have the option to buy double the number of shares.

If a bailout rescues the stock, and production resumes, your options pay out far better than the stock.
If the company goes under, both options and stock become worthless.

BUT if the company stays at the same price for 2 years, the stock retains it's value while the options expire worthless (-100% loss).  Normally the odds for that are quite good, so this better be very unlikely if you want to use options instead of buying shares.

Note I have no experience with options, and I don't have any on Boeing as I'm writing this.  So make your own.. "call".

Good point.
June 2022 at the money call options are trading for $50. So, for $5000 you can control 100 shares vs 50 shares if you bought the common stock. You could make twice the profit with the same money. But, BA's got only two years to figure it all out.

I'd rather accept less risk (and profit) and just buy the common stock. If the price of an at-the-money call were only $30, though. . .. .. .I might be tempted.

Six weeks later and BA has reported earnings already and the stock has traded flat for the past month (or so).

June 2022 $100 calls are worth $60, so a nice 20% gain in six weeks. Stock has gone from $101 to $131, about a 30% gain in the same amount of time, with no worry about time decay.

In the meantime, who wants to get into an airplane already?

Place your bets and take your chances accordingly.

A better risk/reward ratio for most percentage gains is to buy deep in the money options, with a strike price between 1/2 and 2/3 the current price.  That gives you 2:1 - 3:1 leverage for a relatively small premium, that often works out to be equivalent to a margin rate of 3-4%.  Although with current high options premiums it might be more expensive now than usual.

Right now, pre-market, it's trading below $149 and DOW futures point to a drop more than 1000 points at the open.

I think that anything is possible. The bear market is here and the travel sector is generally a leading economic indicator. Lots of people are not traveling, canceling trips, etc, which means the airlines will lose money, which will decrease demand for airplanes. On the positive side, it will reduce the pressure on Boeing to solve it's 737-800 Max problem.

Generally when we enter a bear market, they last for more than just a couple of weeks.


I'd also like to revisit this.  It wouldn't surprise me if the broad market has a pattern that looks much like what Boeing has had since it's bottom, particularly the taking a couple months to head lower, winding up closer to the bottom than to the bounce-back after the bottom.

Telecaster

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Re: Boeing
« Reply #48 on: May 07, 2020, 01:06:19 PM »
Although it depends on Congress, Boeing could also ask for more defense contracts now, when air travel is shut down.  Government loans are probably needed no matter what, but even better is purchasing fighters and military helicopters from Boeing.

Government contracts take a loooooooong time to process and as you point out, there is no guarantee.   In any event, commercial aircraft is a much bigger portion of Boeing's business than defense.

Buffett didn't say this, but I will:  Boeing's management team sucks.  They are Jack Welch acolytes who run the company for their own enrichment.  And just like GE they have been stripping the value out of the company and leaving a hollowed out shell.

bwall

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Re: Boeing
« Reply #49 on: May 07, 2020, 01:21:19 PM »
Buffett didn't say this, but I will:  Boeing's management team sucks.  They are Jack Welch acolytes who run the company for their own enrichment.  And just like GE they have been stripping the value out of the company and leaving a hollowed out shell.

Agreed. 

For me, Exhibit A is the 737 MAX problem. It's been over a year since they've been grounded and there is no fix in sight. I made the same comment a month or so ago on another thread and got pushback from some who disagreed. They wanted to blame the regulators. I still believe the fault lies squarely with Boeing. If they knew how to fix it, they would have announced something. Production has now stopped and there is no end in sight.