Are you an ardent follower of investment guru Warren Buffett? Then you may find Boeing (NYSE:BA) an intriguing investment despite three 737 crashes.
Investors should note that Warren Buffett’s Berkshire Hathaway Inc. (NYSE:BRKa) BRK.B has added about 240% in the past decade (as of Jan 7, 2020) versus the 181.4% gain of the broader market ETF SPDR S&P 500 ETF (NYSE:SPY) (ASX:SPY) . Naturally, most investors look to imitate his strategies (read: Top Performing ETFs of the Decade).
Normally, Buffett takes interest in companies trading below what he believes is their intrinsic value. He aims long-term outperformance and apparently ignores short-term downturns. Probably this is why this investment veteran is now rumored to be betting on Boeing shares (acquiring a $5-billion position) that lagged the broader market last year. Berkshire Hathaway has neither confirmed nor denied the speculation. The talks boosted Boeing shares by 1.1% on Jan 7.
Why Boeing Could Shine Ahead Despite Crashes
Boeing shares suffered a lot in 2019 as the 737 Max, one of Boeing’s best-selling planes, was involved in two deadly crashes. More than 700 Max jets are now grounded globally. The stock lost about 1% in the past year.
However, with Boeing CEO Dennis Muilenburg stepping down in late December after a difficult year, shares set for a northbound journey. Though the latest spike in shares appears short-lived due to another crash of Ukraine-bound Boeing 737 in Iran on Jan 8, long-term prospects may not disappoint (read: Boeing to Halt 737 Production: ETF Losers & One Likely Winner).
Furthermore, Boeing is a China-dependent stock as the Asian country manufactures components for the aerospace giant. About a two-year-long trade tension between the United States and China have wreaked havoc on Boeing shares. But with trade tensions receding gradually, Boeing shares are likely to rebound.
Boeing is reportedly mulling over cost cuts and issuing debt to raise capital to counter the 737 Max crisis. Boeing shares offer moderate value with a Value Score of C. Forward P/E ratio of the stock stands at 20.2x versus 17.2x offered by the industry. P/Sales ratio of the stock was 2.2x versus 1.6x of the industry.
ETFs in Focus
Investors, who want to follow Buffett’s likely bet on Boeing, might be interested in playing the below-mentioned Boeing-heavy ETFs, most of which are aerospace and defense ETFs. The sector is also in a sweet spot currently given the spike in geopolitical tensions caused by the latest U.S.-Iran feud. Investors who are worried about Boeing’s future due to the latest crash in Iran, might find the basket or ETF approach as less-risky.
iShares U.S. Aerospace & Defense ETF (HM:ITA)
The Zacks Rank #2 (Buy) fund invests about 21.2% of assets in Boeing (read: 10 Power-Packed ETFs to Buy for 2020).
SPDR Dow Jones Industrial Average (NYSE:DIA) ETF (TSXV:DIA)
The Zacks Rank #1 (Strong Buy) fund has about 7.88% exposure to Boeing (read: ETF Strategies to Stave Off Middle East Tension).
Industrial Select Sector SPDR Fund XLI
The Zacks Rank #1 fund puts about 7.24% weight in Boeing.
Invesco Aerospace & Defense ETF PPA
The Zacks Rank #2 fund has 7.04% focus on Boeing.
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The Boeing Company (BA): Free Stock Analysis Report
SPDR Dow Jones Industrial Average ETF (DIA): ETF Research Reports
iShares U.S. Aerospace & Defense ETF (ITA): ETF Research Reports
Industrial Select Sector SPDR Fund (XLI): ETF Research Reports
Invesco Aerospace & Defense ETF (PPA): ETF Research Reports
SPDR S&P 500 ETF (SPY): ETF Research Reports
Berkshire Hathaway Inc. (BRK.B): Free Stock Analysis Report
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Zacks Investment Research