Top Picks 2020: Boeing Company (BA)

01/07/2020 5:00 am EST

Focus: INDUSTRIALS

Jim Powell

Principal Analyst, Global Changes & Opportunities Report

I think 2020 will be much more challenging year for investors than 2019. If my analysis is correct, we will have disruptive innovations coupled with serious political, economic, and investment volatility, cautions Jim Powell, editor of Global Changes & Opportunities Report.

My top pick for 2020 for risk-oriented investors is Boeing (BA) — a blue chip fallen angel that is America's leading commercial aircraft manufacturer, and our biggest exporter.

As most readers may know, Boeing ran into trouble when its popular 737 Max aircraft recently suffered two crashes with multiple fatalities. In the aftermath, almost 500 “Maxes” were grounded throughout the world and have yet to be recertified for use.

On December 16, the FAA announced that the 737 Max recertification has been pushed back again. On the same day, Boeing announced that it would suspend 737 Max production in January. Industry insiders believe recertification may not happen until March 2020.

At the same time, the pressure from airlines who want their 737 Max aircraft put back in service is growing. The aircraft is so fuel efficient and profitable, the airlines that invested heavily in them want the safety problem fixed ASAP and the planes put back in the air.

Other airlines that ordered 737s want the aircraft recertified so that their orders can be filled. The economic — and political — pressure on the FAA and Boeing to get the job done is enormous — and it’s growing.

Meanwhile, Boeing is taking some costly hits from the 737 Max crashes. Many lawsuits have been filed by the families of the passengers who were killed. Airlines with grounded aircraft are seeking relief for the losses they are suffering.

At the first indication that the innovative 737 Max is about to be recertified, I think Boeing’s stock will soar. The stock was appreciating strongly before the troubles began. The up-trend suggests that Boeing will do more than just recover from the 737 Max problem — it should resume its upwards course. If you wish to ride along, you must be onboard ahead of time.

Meanwhile, on December 23, Boeing’s Board of Directors replaced the company’s efficient, but cool, Chief Executive, Dennis Mullenburg, with the much more empathetic David Calhoun, the current Board chairman.

The shakeup should help Boeing rebuild the confidence of travelers, improve its image in the airline industry, and rebuild its relations with the FAA. The change should be a long-term benefit for Boeing — and its investors.

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