Update Boeing (BA)

12/15/2010 4:00 pm EST


Jim Jubak

Founder and Editor, JubakPicks.com

On December 14 Boeing (BA) shares showed up in an unusual category: For the first time in five days the stock wasn’t listed among the worst performing stocks among the Dow Jones Industrials. Instead it showed up on the other side of the ledger among the best performers.

All it took was an announcement from Boeing that it was raising prices for its planes for the first time in two years.

The size of the increase—5.2%--isn’t especially important. Any price increase at all is confirmation that demand for aircraft is running so hot and supply is so limited that aircraft makers can charge more for their product. Airlines are so serious about refreshing their fleets after postponing buying during the industry bust that they’re willing to pay more for new planes. (Or at least that they’re willing to start their negotiations on price at a higher level. All planes sell at a discount.) Boeing’s previous price increase—2.6%--came in 2008.

Boeing and its rival Airbus have pushed production lines to record rates in order to work down a seven-year backlog of orders.

None of this, of course, means that Boeing’s very public problems with its 787 Dreamliner are over. The plane has suffered delay piled on delay piled on delay—the most recent caused by onboard fires during test flights (November) and the breakup of a Rolls-Royce engine during ground testing (August.) Delivery of the plane is about three years behind schedule.

If you think that the company will work through the problems of the 787 and begin delivery of the plane in the third quarter of 2011, as analysts now estimate, this is the time to accumulate shares. The plane’s original delivery target was May 2008 and before the fires and engine failure the target was the first quarter of 2011. Fortunately, Airbus has had its own problems and its competitor plane isn’t like to be ready for delivery until 2013.

I think with all the troubles at Boeing the current price of shares near $65 is a good entry point. Until the turn around today, the shares were down 5.5% in the last five sessions. I added the stock to my Jubak’s Picks portfolio http://jubakpicks.com/ on September 30, 2010 at $66.15.

As of December 5, I’m keeping my target price on these shares at $8l3 by September 2011.

Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund, may or may not now own positions in any stock mentioned in this post. The fund did own shares of Boeing as of the end of November. For a full list of the stocks in the fund as of the end of the November see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/
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