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Boeing Faces Challenges in the Narrowbody Market

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This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/273827-boeing-facing-challenges-in-narrowbody-market   Aerospace executives know all too well of the difficulties and complexity of developing brand new planes. Investors have learned that aerospace management is often too optimistic in setting entry-into-service dates. Readers have to look no further than the troubles and serial delays of Boeing’s 787 Dreamliner and Airbus’ A380 to get the gist of what I’m talking about. But have airline customers wised up, too? And, if so, will the perception of pursuing a brand new build to replace its 737 in 2019-2020 actually hurt Boeing and ultimately provide an advantage to Airbus’ A320neo in the 150 to 200 seat category? To the first question: absolutely. Bloomberg reported on Southwest’s (LUV) … Read more

Sorting Through the Aerospace Supply Chain

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This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/273424-sorting-through-the-aerospace-supply-chain  As outlined in the previous two editions, The Future of the Narrowbody Market and How to Play the Upswing in Commercial Aerospace, expected deliveries of commercial planes are set to advance considerably in coming years. In this third edition, let’s dig into the valuation and potential upside of Precision Castparts (PCP), one of the best long-term plays on commercial aerospace demand. We’ll also dive into an interesting small-cap play and a compelling micro-cap opportunity in the aerospace supply chain. For new readers to this series of articles and analysis, let’s briefly review the trajectory of large commercial aircraft deliveries during the next several years. Aside from the fundamental drivers (replacement planes, … Read more

How to Play the Coming Upswing in Commercial Aerospace

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This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/272730-how-to-play-the-coming-upswing-in-commercial-aerospace In this, the follow up to our analysis of the narrowbody airplane market, let’s dive into just how robust the delivery upswing will be in commercial aerospace during the next few years and highlight a couple interesting, diversified ways to play the coming boom. We’ll also dive into one of the best aerospace names to own for the long haul, but leave open for Part III of this saga, an in-depth look at this firm’s valuation and the analysis of yet another intriguing play to capitalize on this multi-year cyclical upswing. First, let’s get a feel for what to expect from Boeing (BA) and Airbus during the next five years in terms of … Read more

The Future of the Narrowbody Airplane Market

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This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/272454-the-future-of-the-narrowbody-airplane-market As many long-time followers of Boeing (BA) understand, the firm’s decision on what to do next with its workhorse 737 (the plane best known for being flown by low-cost leader Southwest) could make or break the company during the latter part of this decade and into next. One of the key things Boeing has been trumpeted for in the past has been its keen foresight in building the revolutionary, mostly-composite, point-to-point aircraft–the 787 Dreamliner–while its main rival Airbus pursued the gargantuan A380 double-decker, the latter betting on the proliferation of the hub-and-spoke model and high-density flights between major airports across the globe. Though there is a market for both the … Read more

Boeing Has Upside, Suppliers to Benefit From Boom

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With the first delivery and ramp up of Boeing’s (BA) revolutionary 787 Dreamliner, the reintroduction of its 747 platform, and rate increases on its workhorse 737 line, investors should expect a fairly significant ramp up in commercial aircraft deliveries, which remain supported by a massive backlog of unfulfilled orders. Impressively, Boeing’s commercial backlog of 3,400-plus planes is roughly 7x this year’s expected commercial revenue, in dollar terms. Needless to say, parts suppliers like Spirit Aerosystems (SPR), Precision Castparts (PCP), Rockwell Collins (COL), Goodrich (GR), Honeywell (HON), United Technologies (UTX) and a variety of others (including engine-makers like GE) will benefit from the coming boom in aerospace. Click to enlargeFurther, drawdowns in inventories, which have been a cumulative drag of over $15 billion … Read more

Looking Beyond Boeing’s 787 Dreamliner

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This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/270296-looking-beyond-boeings-787-dreamliner Despite Boeing’s well-documented troubles with its revolutionary 787 Dreamliner, the aircraft will likely dominate the small wide-body jetliner segment for many years to come. Investors correctly remain focused on the plane’s first delivery later this year, and subsequent production ramp up to satisfy a massive backlog of unfulfilled orders. And while successful execution on its 787 program would be welcome news, especially as it eases inventory build and bolsters cash flow, looming threats posed to its workhorse 737 in the narrowbody arena— the largest market as measured by units and dollar-value during the next couple decades– should not be ignored. What once was a duopoly in the large commercial aircraft market … Read more

Top Research and Ideas You May Have Missed

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Is Quant Value Giving Intrinsic Value Investors a Bad Name? Surely, you don’t believe Warren Buffett’s “style” is out of favor? By Brian Nelson, CFA I need to make sure that you’re aware of something very important. The media and perhaps many investment professionals define the concept of “value” as companies with low price-to-book (P/B) ratios, and the concept of “growth” as companies with high price-to-book ratios. This definition of “value” and “growth” and their corresponding returns have been magnified in writings throughout the media and across quantitative research, even in prestigious journals. Warren Buffett has been rallying against most quantitative applications and how “growth” and “value” are defined in popular media and quantitative research for decades.  Here’s one of the Oracle’s most … Read more

Our Thoughts on Berkshire Hathaway’s Latest Annual Report

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Image Shown: Shares of Berkshire Hathaway Inc Class B stock have been on an upward climb since June 2020 with room for additional capital appreciation upside. The top end of our fair value estimate range for BRK.B sits at $275 per share. By Callum Turcan We include Berkshire Hathaway Inc (BRK.A) (BRK.B) Class B shares in the Best Ideas Newsletter portfolio and continue to be enormous fans of Warren Buffett. Berkshire Hathaway reported fourth quarter 2020 earnings on February 27 which saw the firm’s ‘operating earnings’ (a non-GAAP metric that better reflects Berkshire’s underlying financial performance) surge higher by 14% year-over-year aided by strength at its ‘railroad, utilities and energy’ and ‘other businesses’ operating segments. However, Berkshire’s operating earnings for … Read more

Dividend Increases/Decreases for the Week Ending December 16

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Below we provide a list of firms that raised/lowered their dividends during the week ending December 16. The dividend reports of covered firms on this list will be updated shortly with the new information. To access our dividend reports use the ‘Symbol’ search box in our website header. Firms Raising Their Dividends This Week ABM Industries (ABM): now $0.17 per share quarterly dividend, was $0.165. AES (AES): now $0.12 per share quarterly dividend, was $0.11. American Tower (AMT): now $0.58 per share quarterly dividend, was $0.55. Andersons (ANDE): now $0.16 per share quarterly dividend, was $0.155. Avianca (AVH): now $0.032 per share quarterly dividend, was $0.03. Balchem (BCPC): now $0.38 per share quarterly dividend, was $0.34. Boeing (BA): now $1.42 … Read more

The Best Years Are Ahead

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By Brian Nelson, CFA — The wind is at our backs. — The Federal Reserve, Treasury, and regulatory bodies of the U.S. may have no choice but to keep U.S. markets moving higher. The likelihood of the S&P 500 reaching 2,000 ever again seems remote, and I would not be surprised to see 5,000 on the S&P 500 before we see 2,500-3,000, if the latter may be in the cards. The S&P 500 is trading at ~4,100 at the time of this writing. — The high end of our fair value range on the S&P 500 remains just shy of 4,000, but I foresee a massive shift in long-term capital out of traditional bonds into equities this decade (and markets … Read more