Boeing (BA)

(A Top Pick April 1/14. Up 22.18%.) Production is ramping up and they are coming off a very heavy R&D investment cycle. This is a free cash flow story. As the programs start to ramp down, they are going to start generating a lot of free cash. Things are going quite well for them, but it is getting up there, so she has been selectively taking some profits.

Has a good backlog. This is one that you can wait for and buy it on a dip. With lower oil prices, there is the potential for a lot of these airlines to not go out and spend on new planes. With oil coming down, they can afford to use their existing planes for a longer period of time.

(A Top Pick March 19/14. Up 27.01%.) Thinks this has a long ways to go from here. It is obviously built on the cycle of new aircraft development, headed by the 787 Dreamliner. These new airplanes are 7%-10% more fuel efficient than the old airplanes. This is a story that will go into the 2020’s.

Put it on your watch list. If there is any sort of correction he would buy it. His model price is $128.46, or 16% lower. It is appealing there. There are huge procurements by the US government. We have the December balance sheet.

One area you could look as an entry point would be at $145. You could look at it today as none of the areas he is looking at are showing it to be overextended. If you have a longer-term timeframe, he wouldn’t worry about the entry point.

They have about 5 years of backlog orders in their business. You can probably get a bit of a better entry point if you are patient. Not a bad pick.

This seems to be immune to the strong US$. He would imagine it is because of orders sold for a long way ahead. Because of this, he doesn’t think the US$ is going to affect them too much. Chart shows a symmetrical triangle formed in 2014, followed by a breakout. The alternative to chasing this one is maybe to Buy an ETF that would give you a basket, such as Powershares Aerospace & Defence Portfolio (PPA-N).

The best performing stock in the S&P 500 so far this year. At the upper end of its range. Just recently set a new all-time high. They are benefiting from increased orders for the Dreamliner. The other side of that is that with lower oil prices, the efficiency of the Dreamliner engines is not as important as it was. Trading at 17-18 times earnings, so it is not cheap.

The period of seasonal strength for this and all the other industrials is between now and about May. For this one in particular though, he is seeing a seasonal run between now and mid-June, with an average gain from the start of the year to mid-June is about 14%. This had a bottom back in December, but is now outperforming the market. Everything is lining up for a continued run higher. It looks good here and he would expect it to continue all the way through to June.

(A Top Pick Feb 4/14. Up 24.29%.) This is really about the commercial aerospace cycle. They are seeing good orders from airlines. Their program of delivering the 787’s is well underway. This will transition into a free cash flow story, as their R&D spending ramps down in a couple of years and they will be generating a lot of cash. The premise is that they will be returning that cash to shareholders. She wouldn’t be stepping into this one now.

Likes commercial better than defense. There are budget constraints in defensive. He likes the suppliers better. He thinks they have done a good job of hedging the currency.

(A Top Pick Feb 6/14. Up 10.54%.) They capitalized a lot of the costs in building the 787’s, and now they are delivering them. The backlog goes out years. The cash flow will be astounding. They are going to have to do something with that cash and he imagines that it will be returned to the shareholders through buybacks or an increase in the dividends. This is an absolutely phenomenal core holding to have.

This is one of those companies that basically work on 2 functions, low interest rates and low fuel prices, so airlines are doing quite well. There have been growing orders recently. He thinks you are at the top end of these types of companies. Once oil prices and interest rates start to rise, it will be very difficult for airlines and this company.

Extremely well managed business with a large order backlog. A good business.

Traded down a little on the oil story. This is kind of illogical. The thesis is that with lower oil prices, the drive for new fuel efficient airplanes will be lessened, which doesn’t make a lot of sense to him. It is the competitive landscape that matters. One airline against another as beneficial margins and competitive margins lead to pricing decisions. They have a $375 billion backlog, which is pretty much clear sailing through the end of the decade in terms of their delivery schedule. Thinks you could probably see a mid-teens type long-term growth. Dividend yield of 2.95%.