BOEING Stock Analysis 2021 + PLUS Phil Town's Buy Prices of BA
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Hi today i’m going through Boeing stock considering it has been one of the most affected businesses in 2020. Maybe the dust has settled and we can see into the future a little better now.
I based a lot of my knowledge on the great investors. Peter Lynch, Warren Buffett, Charlie Munger, Mohnish Pabrai and a handful of others.
Phil Town is someone who I think is an interesting investor and I like to see what he is investing in.
That’s led me to investigate Boeing today.
Boeing is the American plane manufacturer for those who have no idea what I am talking about. But i think everyone knows what Boeing does. Lets move on.
Industry
Obviously 2020 is going to be the worst declining year on record for demand. Somewhere around 50% decline worldwide is expected.
Now, a lot of people will point out that lots of airline companies are going to go bankrupt. And I agree, airlines are generally terrible businesses with razor thin margins already.
Plenty of them will disappear.
But Boeing shouldn’t get too worried about this in the short term.
Sure, some of their customers are going to be out of business, but if demand goes back to normal, then new customers will want planes.
I’m not going to speculate on other forms of travel, like drones or rockets, as I think airplanes are here to stay for the next decade. After that, I have no idea.
So as long as Boeing can stay in business, they will have orders to take. It doesn’t get much worse than 2020 for Boeing, so if they can survive, things should improve.
Competition
This is the big selling point for Boeing for investors. They essentially are in a duopoly with Airbus in worldwide plane production.
The expertise required to build planes at efficiency is enormous. The years of experience is a huge barrier to entry.
And another reason the competitive moat is enormous is just the costs associated with setting up the manufacturing facilities to build planes.
That is not something a coder can do in his garage.
For these reasons, the business is right up there with some of the best business moats in the world.
Management
ROIC is a metric I love to look at for a business that is compounding their money.
ROIC 5 year average = about 8%
So even in the good times, this wasn’t strong.
Regarding debt, this is the one area business can really get into trouble. Boeing has a lot of debt and issuing more and more debt throughout 2020 and probably into 2021.
The US government even said they would help Boeing with their serious debt issues and give their customers, i mean the other airlines, money as well to help.
It’s a real mess.
So instead of going bankrupt, Boeing has issued huge amounts of debt. I hate businesses with debt, especially when they are doing it to stay alive.
It could take decades if ever to pay this debt back.
Phil Town’s Put Options
1st = $225
2nd = $165
So Phil Town loves a margin of safety and being conservative. So for him to think $225 and $165 is fine for him to buy shares, this is very interesting.
By the way, if you are interested in learning about selling put options like Warren Buffett, Phil town and myself, check out the video I made explaining the strategy.
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