Boeing stock is due for a reckoning after growing 78% in a month despite losing money and not making or selling any airplanes.
Boeing stock (NYSE:BA) continued to slide into a second day of losses, creating some drag on the Dow Jones Industrial Average.
Boeing gave up over 5% of its share price Wednesday against the Dow’s more modest dip of 0.7%. The S&P 500 Index retreated an even more slight 0.3%. That shows the impact that Boeing stock has on the Dow level.
Listen, I’m not an airplane industry expert, just an outside guy looking in. But what else can you say about Boeing stock? The airplane maker hasn’t been making airplanes. They haven’t been getting orders for planes. And they haven’t been making money.
Boeing deliveries hit a 60-year low in May of just four airplanes.
These realities about Boeing’s business make the stock’s steep 73% climb from $133 on May 8 to $230 on Jun 8 baffling. The brash Boeing rally coincided with a bull market in airline stocks, with American Airlines leading the way.
While Berkshire Hathaway dropped its sizable airline holdings, retail investors have rushed in to buy air stocks. Ironically, they’re trying to invest like Warren Buffett and bet on American business at a bargain price because of the pandemic.
But everyone’s trying to be greedy while others are fearful.
Recent months have seen a surge in retail investors buying stocks. Many of them are betting against Buffett on Boeing stock.
Meanwhile, airline stocks are some of the most popular on the Robinhood stock brokerage app. American and Delta Airlines clock in at the third and fourth most held shares on the platform. United Airlines is 12th most popular, and Boeing is the 14th most commonly-owned stock.
Ask retail stock traders how their big cannabis bet has worked out for them over the past year.
Casual stock traders went thrifting for bargain pandemic stocks this spring. But they bought shares in companies facing intense headwinds to profitability. And the airline industry is a notoriously fragile, low-profit margin sector of the economy. All three legacy airline companies mentioned above have declared bankruptcy in the last twenty years.
Retail investors in these three airlines also face a threat from Southwest Airlines (NYSE:LUV), which is expanding dramatically. Southwest is chomping at the bit to fly its 34 Boeing 737 MAX planes by the fourth quarter. It also plans to field 48 more of the latest Boeing 737 model update by late 2021.
Disclaimer: The opinions expressed in this article do not necessarily reflect the views of CCN.com. The above should not be considered investment advice from CCN.com. The author holds no investment position in any of the stocks mentioned at the time of writing.