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Fair Value Estimates Matter – Case Study: Boeing

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Image Source: Boeing’s share price converged to our estimate of intrinsic value in the summer of 2019. The plane maker continues to navigate tumultuous skies with its 737 MAX. By Brian Nelson, CFA Dow Jones Industrial Average component Boeing (BA) continues to dominate news headlines, and not for good reason. Let’s revisit our March 2019 article for some background: The news for Boeing hasn’t been this bad since the doldrums of the 787 Dreamliner build some years ago now. The 737 narrowbody, the line-up all over the news of late, is the workhorse of the industry, and Boeing’s next generation 737 MAX has been the fastest-selling plane in the aerospace giant’s history. Most countries around the globe, including the US, … Read more

United’s Passenger Debacle An Immaterial Investment Consideration

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Image Source: Business Insider  The major airlines in the US have done a fantastic job capitalizing on the ongoing upswing in air travel demand, but their economically-sensitive business models remain the most operationally-leveraged out of any industry group in our coverage. This should be investors’ biggest concern: A downturn in the global economy and competitive pricing pressures are far greater worries for investors than United’s recent passenger debacle. However, as with many news-oriented items (as opposed to materially-relevant, investment-related items), United’s misstep is making headlines in a big way. Though the footage in this article is appalling, investors in airline stocks have much more important things to worry about, in our view. By Brian Nelson, CFA The airline industry has … Read more

Warren Buffett Is Back Into Airlines, Should You?

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Warren Buffett has changed his mind about airline stocks… In this 10-minute podcast, the Valuentum analyst team talks all about the hazards of the airline business model from substantial operating leverage to the risks of volatile jet fuel costs to bankruptcies and beyond. The team also highlights the long-term passenger growth prospects of the sector, and recent consolidation that has brewed a more optimistic tone from industry observers. To view Valuentum’s updated YouTube page, please see here. Ticckerized for airline-related equities around the globe. Brian Nelson, CFA: The worst sort of business is one that grows rapidly requires significant capital to engender the growth and then earns little or no money. Think airlines. There’s a durable competitive advantage that has proven … Read more