BA

BA, Boeing Co

Hamilton

BA jan 16 2016

We never expected this stock to trade above, say, $120 or so. (and before that much above $105). The B-wave did not materialize and simple proceeded to go onwards and upwards. Just last December, a few weeks ago, the 24 analysts that cover this stock unanimously thought it was a buy, those that didn’t changed their minds. Keep in mind that this is after a 5-fold increase in about the same number of years. The p/e is 16X and the yield 3.4%, pretty normal.

   We are quite certain that you do not want to own this stock in the next few years. The EW pattern, though perhaps confusing in the middle, is perfectly straightforward at the end, which is a clear 5th wave from the lows of 2009 to the highs around $160. This expectation is not coloured in any way by moves of HQ or extra-curricular activities of senior management. The “logical” target is about $30.

   EW is free of fundamentals, let’s look at them anyway;

boeing fin 2boeing fin 1

Boeing has received huge tax incentives from the government and spends an offensive amount on share buy backs. Therefore both earnings and earnings per share are shown in the above tables from 2006 to 2013, a period that covers most of this 5th wave. Neither of these have grown anywhere near the same rate as the stock. Earnings per share are up by , maybe , 50%. Net earnings may have doubled on average.

     Governments around the world are closer to being broke that ever before. This crimps  military spending but also a good part of the civilian sector as many air carriers are essentially government owned or subsidized. In short we think this stock is a sell.

BA, Boeing update

Hamilton

Then and now;

BA july 12 2013ba nov 22 2013

Again we got it wrong. We did not expect the stock to move much above $105  in the B-wave. Having said that the wave count itself still looks to be just fine so we would expect, at the very least, that the doubling in the last year will be completely retraced and then some. Most other technical indicators , such as RSI and MACD more or less confirm this. The p/e was close to 24x, pretty rich for this kind of industrial company. For the gutsy types this may be worth doing a put on.

BA, Boeing

Hamilton

BA july 12 2013

Never looked at Boeing, not sure why. The company has been in the news quite a few times. There were some extra-curricular activities of one of the top guys that caught the public’s attention and then there was the move of HQ from Seattle to Chicago that no one understood. More recently there were additional delays for the Dreamliner resulting from battery fires , which appears to be the story today. One of the planes had a fire at Heathrow, it had waited patiently to do so at the double top level after climbing almost 100% in the last year. The miracle today is not that it falls 6/7% , but that it ever got to these heights. That, by the way, is a sell.

UTX, United Technologies Corp.

Hamilton

Today’s Toronto Star, had an article in it by Bill Carrigan, a very well respected and independent analyst. He starts the article by recounting a conversation during which he was asked what he was trying to do (while thumbing through some charts). He responded that “he wished to know if the price of the company we are discussing is going up or down, and when it is likely to stop doing that” . After digressing a little here and there he settles on UTX, presumable as an example. Here are the charts;

utx1 utx2

I use a 30/40 year chart rather than a 10 year one, the last 10 years having been so unique in many ways that they cannot be viewed as representative of, what one might call “normal”, for lack of a better word. Also, in this case I would use both arithmetic and semi-log scale charts. The reason for this is that the semi-log scale has a smoothing effect as all things are proportional making the Himalayas look like dunes and adding considerable credibility on whatever count one would apply. Left is arithmetic, and right semi-log! Another advantage is that the channels are narrower and clearer.

The price of this stock has been going up (to answer the first question). So much so in fact that I wonder if it was worth eight years at  the University of Amsterdam to get my masters in economics. Just buying this stock in 1972, with a lot of borrowed money, would have given the same result with much less effort.

The second question is more interesting, after all predicting the past is not that difficult. Looking at the log chart’s ( click on it to enlarge ) channel, the upper trend-line would suggest a possible price high of $110 tops. On the arithmetic chart that level has already been reached or exceeded. Before you get there you have to go through $100, that is you have to surmount  what I have called the Mnt. Everest syndrome – just $9 above the high reached so far. This stock has a beta of exactly one and 81% of the stock is held by institutions making it very likely that the stock will behave as the rest of the herd and very unlikely that it would simple slice through this level. Analyst calls are rather muted, see below;

UTX3

From an EW perspective two alternative counts readily present themselves (purple and blue). At this juncture it does not matter much which one is the correct one as , at this stage a drop to $40 or to $30 (respective 4th waves of previous degree) is almost immaterial.

To sum things up, it would seem to me that if you are lucky you may gain another $19 at the outside – for a momentum player that would be just fine but would require a tight stop –, if you are not so lucky you may lose about $55. The odds are against you.

Fundamentally the stock yields just under 2%, has gross revenues of 55 bln. and a profit margin of about 8%. The book value is $24.17 so it trades at 3 to 4 X book. The P/E is close to 40. The market cap. is 83 bln. Boeing BA, by comparison is at 56 bln.and trades at a P/E of 16 and pays a higher dividend, here are the charts.

ba a Ba l

Relatively speaking, BA has more room. Still both these companies are in the Aerospace industry and much of that is defense , which , given the deficits is not likely to grow.