Why Invest in Boeing?

Why Invest in
Boeing?
By www.ProfitableInvestingTips.com

http://profitableinvestingtips.com/profitable-investing-tips/why-invest-in-boeing
Not long ago we wrote about
whether or not Boeing would need
to outsource production in order
to remain profitable.

That question largely had to do with
the threat of a long-term trade war
and Boeing potentially losing
markets as a result.

The trade war may well be on its
way to at least a temporary
resolution so the question is why
invest in Boeing over the long
term?

Essentially Boeing is a cash cow
with a dominant position in an
increasingly higher and higher cost
of entry business.

Its only real competitor is Airbus as
the two of them control more than
85% of the commercial aviation
market.

Boeing

Boeing was founded by William
Boeing in 1916 as Pacific Aero
Products Co. He changed the name
to The Boeing Company two years
later.

In 1997 Boeing merged with
McDonnell Douglas in 1997.

Boeing is the largest US exporter
by dollar amount.

The company ranks number five in
the world as a defense contractor.

Boeing manufactures and sells
airplanes, rockets, satellites, and
helicopters of its own design.

It also leases products and provides
lifetime product support to
everything that it sells.

High Cost of Entry
Business

Why invest in Boeing? Our first
reason is that they are in a high cost
of entry business.

They deal in state of the art, high
technology, and produce very
expensive products, which they are
able to routinely sell at handsome,
profits for years and even decades.

The amounts money needed to
compete in this arena are huge, the
skill sets needed take decades to
develop, and the base technologies
are closely held.

State of the Art Jets

The most recent major addition to
Boeing’s fleet of jets is the 787
Dreamliner.

This wide-body, long haul, mid-
sized jet is roughly a fifth more
fuel-efficient than its predecessors
and competitors.

Built with composite materials, the
plane is lighter and cheaper to
operate than other jets of
comparable size and range.

Its noise-reducing features are state
of the art as are it mostly electrical
flight systems.

The jet entered testing in 2009 and
finished testing in 2011.

Boeing spent roughly $32 Billion
developing this jet.

Boeing 787 Dreamliner

Not only did Boeing spend $32
Billion in development, but also it
took just over 10 years from
concept to a flying and sellable jet.

Now the 787 is a mainstay in the
commercial aviation market and
Boeing is looking to develop the
next start-of-the-art commercial jet.

The only other company with
comparable resources is Airbus.

Missiles and Satellites

Going back to the Minuteman
missiles in silos across the wheat
fields of North Dakota and
grasslands of Montana to the
current partnership with Lockheed
Martin in the United Launch
Alliance, Boeing has been in the
rocket business.

They still maintain missiles for the
US nuclear deterrent and run the
United Launch Alliance with
Lockheed Martin.

They maintained the Space Shuttles
when that program was still
running.

This is again, a high cost of entry
business that takes huge amounts of
resources, state of the art
technological skills, and the
capacity to guard what are
essentially state secrets forever.

United Launch Alliance Orion

Boeing does this work and does it
at a profit as part of its Defense,
Space, and Security division.

This company is one of the
mainstays of US military readiness
and able to make a steady profit
year in and year out.

Why Invest in Boeing?

As we so often come back to on
these pages, long term successful
investing depends on the analysis
of intrinsic stock value and Boeing
has this is spades!

The company routinely makes
money.

This ability starts with the ability to
turn new technology into
marketable products.

But, it is more with Boeing because
they have such a wide range of
skills and virtually control the
commercial jet business along with
Airbus.

When they have to, they share little
and inconsequential parts of their
knowledge base to do offshore
fabrication to maintain customer
bases.

Then they do all design, critical
manufacturing, and assembly in the
USA.

Adding Boeing to Your
Portfolio

The Motley Fool writes about 3
Stocks to Build Your Portfolio
Around. The first on their list is
Boeing.

If you’re looking for one stock to
build your portfolio around, one
great company you can count on to
hold its value over time while
paying you a steady dividend, I
can’t think of a better place to start
than Boeing.

In business for more than a century,
Boeing clearly has staying power.

This company isn’t going to
disappear until someone invents a
better way to move quickly over
long distances across large bodies
of land and water.

And while Boeing doesn’t have a
monopoly on building planes, it
arguably has the next best thing:

an oligopoly between it and its rival
Airbus, which between them
account for roughly 88% of all
commercial aircraft revenue.

With $13.6 billion in annual free
cash flow to back up its $10.5
billion in reported earnings, you
know that Boeing’s earnings are of
exceedingly high quality, and more
than sufficient to cover the
dividend.

Boeing’s payout ratio, in fact, is a
very low 38%, meaning that only
38% of earnings suffice to pay the
entire dividend.

Boeing has been paying dividends
for decades and has been steadily
increasing their dividend for the last
seven years.

Boeing is a major player in
commercial aviation and in the
defense industry.

This allows it to use technologies
and skill sets developed in one
arena and apply them to another.

They are also important to the US
economy as the exporter who rivals
all of US agriculture in how much
money they bring back to the USA.

Although Boeing has substantial
cash reserves, they do not have a
large hoard of cash offshore.

There are certainly companies that
have grown faster, but as the folks
at The Motley Fool note, until
someone invents a new technology
for moving people and cargo
quickly from one continent to
another, Boeing will have
customers.

And, as higher technical skills
make that job more efficient and
profitable, Boeing will remain at
the head of the line.

another, Boeing will have
customers.

Why Invest in Boeing?

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