I made some changes to the portfolio today, closing some of the Apple $AAPL trades with profits of 75%-85%. Apple stock gained more than 80% since January. It is time to take some profits. Right now, good deals are not so obvious, therefore, I used the money to buy more shares of Allergan $AGN as an arbitrage deal waiting for the merger with AbbVie $ABBV .
The markets $SPX500 opens lower today with mixed signals about the trade deal. With lower $OIL and $NATGAS prices, our two oil stocks Parsley Energy $PE and Concho Resources $CXO are not doing great today. Most of the gains in our portfolio are coming from our $GOLD miner Polymetal $POLY.L and also from Diageo $DGE.L
Time to BUY BOEING STOCK? ✈️
Boeing $BA stock fell by more than 20% from ATH after the grounding of 737 Max aircraft. But last week, the stock has shown a slight recovery, is it time to buy?
Boeing recently announced that the 737 Max aircraft will be ungrounded in the fourth quarter. It means that airlines will be willing to buy this aircraft again. Also, the boss of the FAA said that they are examining the interaction of humans with computers so that in the future such type of problems don't happen. Are all problems solved for Boeing and is it time to buy?
We should understand the business of Boeing to answer this question. Boeing has a moat. They have only one competitor in civil aviation, Airbus $AIR.PA . 26% of Airbus is owned by a group of European governments and the company receives a lot of subsidies. Boeing receives subsidies too from the US government and are one of the largest lobbyists. But they still need to be innovative and to compete. Boeing is currently the second largest defense contractor in the world after Lockheed Martin $LMT . They are also one of the largest suppliers of NASA.
In the last 3 years, Boeing stock has done great. It all started in November 2016 when Donald Trump was elected president. From November 2016 to March 2019, Boeing gained 215%. Boeing is right now the largest component of the Dow Jones $DJ30 and they have been moving the index which outperformed the S&P 500 $SPX500 since the election. Why did Boeing like Donald Trump? He was going in a trade war with the EU based on the Airbus subsidies. There were also an increased military expenditure. The economy was great and airlines were buying new aircraft, Boeing was making better products than Airbus and they could charge higher and, therefore, they had higher margins. This is a capital intensive industry and usually operating margins are around 4%. For the last 3 years, it has been over 10%. Boeing also repurchased 25% of their shares. These three factors contributed to the massive gains in Boeing stock price.
In the future, these factors won't be pushing the price higher. First, the economy is not doing so great anymore and airlines won't buy new aircraft, especially not from Boeing after the ruined reputation. Donald Trump didn't start any war and most probably he won't do so. I don't think we can expect any big surge in defense budget. Boeing will have to lower margins and they won't be able to buy back more shares. I don't think Boeing will do so great in the next years.
For me, Boeing is expensive but if you are a defensive investor, it could be a great investment. This is a company too big to fail.
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