Not one, but two black swan events have devastated Boeing stock specifically over the past year, making it a value investor's dream today.
One could not have imagined a worse year for Boeing (NYSE:BA) stock.
The broader stock market officially entered a bear market Wednesday as coronavirus put the planet on lockdown. But other stocks fell from frothy valuations after a euphoric rally since October.
Boeing had already tumbled far from a Mar. 1, 2019 peak of $440.62 to close at $347.45 on Feb. 12, 2020, the day the Dow Jones Industrial Average peaked at an all time closing record of 29,551.42. Then it took a further dive with the rest of equities.
At Wednesday’s close, as the broader market entered bear territory, Boeing stock had positively cratered from its March 2019 peak to a 31-month low of $189.08. This makes the stock look like a value investor’s dream.
Here’s why the rest of the market is selling Boeing stock this week.
The 737 MAX crisis is far from over. The Federal Aviation Administration (FAA) grounded the planes a year ago, and there’s no end to the grounding in site. New questions about the 737’s safety have stalled the hope for middle-of-the-year FAA approval to fly again. That leaves airlines more likely to continue canceling and delaying orders for new planes.
Meanwhile, the coronavirus is ravaging commercial air travel. Airlines are drastically marking down prices of round trip tickets to less than half the typical fare for a one way ticket. Less demand for air travel means lower demand for new planes.
That could be why Boeing has fared even worse than other stocks in this coronavirus driven downturn. Boeing stock has crashed harder and rallied less than the rest of the stock market on this bumpy ride down.
The 737 MAX crashes and coronavirus pandemic are not one, but two “black swan” events, unpredictable developments that hit The Boeing Company specifically with existential shocks.
The fallout has been so bad, by market close Wednesday, Tesla (NASDAQ:TSLA) overtook Boeing as the most valuable industrial company in the United States.
For value investors in the style of Warren Buffett, Boeing stock must look absolutely mouthwatering right now. Value investors may sound square, but they’re absolute savages.
They like to wait for a stable company with good long-term prospects to bleed in the streets like Boeing is right now, and take advantage of their stock at a very attractive price.
Will Boeing stock ever fly high again?
There’s almost no doubt it will. The reality is Boeing is one half of a global large commercial aircraft duopoly. There are basically two options, Airbus or Boeing.
The 737 MAX crashes were devastating, but not the end of Boeing. That’s why value investing genius Warren Buffett says the MAX crisis isn’t going to change the airline industry. It has already had a strong safety record. And the 737 crashes were a glaring exception to that safety record.
Boeing isn’t going anywhere. Its stock is down 50% from a year ago. Based on Buffett’s assertions, Boeing stock is a value investor’s dream right now.