Boeing (BA)

This industry is doing very well and they have the winds to their back. Coming out with new products. There has been good reception to the new wide-body planes, which is really helping out a lot of companies. There is certainly potential for this to go higher. They will probably benefit from better global growth, which he expects to see in the next several years.

They have a large backlog. They have 5700 planes in backlog. It is really a cash flow story. The valuation is not very stretched. Trump’s talk of trade could be a risk. China is a big, big customer of theirs. You have to defend against stumbles via diversification.

Boeing (BA-N) or Delta (DAL-N)? A fine company with a fine management, but absolutely incompetent as far as their capital market sense is concerned. They’ve been buying back stock again and again. You would’ve thought that if they had bought back all that stock, earnings would have been going up, but they are sliding down instead. They should stop buying back stocks, because essentially, they are buying back a little bit of BV, and a whole lot of air. Trading at about 16.5X BV, which is very high. Delta trades at about 2.5X BV. He would buy Delta and forget Boeing.

(Market Call Minute.) They are in full production of the 787 Dreamliner and the 737 Max. It’s all about having better technology, more fuel efficiency which just go straight to the bottom line of airlines. This is a cash flow story.

Airplane demand is driven by GDP growth, but demand is still growing in Asia. They need to transition their backlog into cash flow. She is happy to continue to hold it.

Earnings forecasts for this airline has gone absolutely nowhere for almost 3 years. Also, they’ve been buying back stock, and the trend of their BV is down. He hates seeing companies buy back stock when their balance sheet is not all that strong, which is the case with this company. You are left with the hope that Iran’s 100 new aircraft order is going to do something to the stock. FMV is about 90% of the current price of $119. Trading at 17X BV, which is not cheap. Has no reason to particularly like this at the present time.

They have 5700 planes backlogged and are in full production. A cash flow machine. Doesn’t trade at an expensive multiple. There is a lot of visibility. It is not just the 787 Dreamliner; it is other aircraft. The theme here is that they are more fuel efficient than the older airplanes that are around, which is a very meaningful part of an airlines net margins. 3.29% dividend yield.

He would not be a buyer, but would Sell, or a Hold at best. It has a credible backlog of about 8 years of production ahead of it, but part of that is premised on a lot of emerging-market sales. A great company, but thinks it has peaked. He would be inclined to lighten up.

Compete against Airbus, BBD.B-T and others. He would hold because a lot of orders for airlines come from Asia and he does not know if that will slow down.

(A Top Pick Aug 26/15. Up 4.48%.) This has about a half $1 trillion backlog, 5700 airplanes. It is a cash flow story. Their capital expenditure program has really peaked, which means greater and greater free cash flow.

Continue to hold it, but you may not make any money in the short term. The problem is that with the fuel prices being so low, there is less incentive to upgrade airline fleets to get more efficient equipment.

This is a great company. They own the market share in planes. The Paris air show was on recently and he feels people were really disappointed in the order flow. The global airlines are all shutting capacity back a bit. If you own he would be inclined to Sell a little.

You don’t want to completely downplay the SEC issues, but these are complex and accounting processes. The company is doing extremely well. The nice thing is that there is a fair bit of visibility. They are at a stage in the process of the 787 and 737 Max, where they are in full production, so it is really a cash flow story. Not trading at extreme valuations and there is a fair amount of predictability of the runway. Thinks there is visibility out to the end of the decade.

(Market Call Minute.) He would prefer General Electric (GE-N) over this.

This is a rare company right now because you are getting a 3.5% dividend yield and probably 20% of dividend growth for the next couple of years. It basically operates in a duopoly. Has struggled of late because of a couple of concerns. One is the long-term profitability of their 787 Dreamliner. They are also transitioning to their big program with the 737 going to 737 Mac and the 770 is going to the 770X. Those are going to require working capital adjustments over the next few years. They have a five-year backlog that is rock solid.