Swing low, Boeing (BA) . The name now stirs images of extreme volatility, having just surrendered almost all of the stock's 2018 performance. To be honest, I no longer have a position in this one. I don't like trouble. When that Lion Air 737 Max crashed into the sea after departing Jakarta back in October, I immediately took off half of my long position in the name. My intent was to work my way out of the balance, which I did, exiting the last few shares at $312 on Tuesday morning well before the opening bell in New York. A $47 range from top to bottom while working an out order was not exactly what I was going for. You know what they say. You're first out is your best out. This may have been the time when doing something all at once might have been for the better. I'll still take the disciplined approach moving forward, thank you.
Where to Re-Enter?
Ordinarily, I might be satisfied with a sizable capital extraction at this point. I would then re-enter a name so obviously fundamentally sound. Sixteen times forward looking earnings. Solid Current ratio. Robust cash flows. Nice (and rising) dividend yield. Oh, and a semi-captive high-end big ticket type clientele. In fact, just this morning news broke that Jeju Air would purchase 40 737 Max aircraft for $4.4 billion. The problem there is that this item did not hit the tape by itself.
The firm also cancelled a conference call that had been set for this morning to discuss issues related to that ill-fated Lion Air flight off of Indonesia last month. That creates increased uncertainty. This is not the market for increased uncertainty, if there ever is.
There are conflicting reports since the Lion Air crash on whether the firm had informed purchasers correctly about potential flight control sensor failures regarding the 737 Max, and incorporating lessons learned. Thoughts were that perhaps this might have been done through increased training or in manual form somehow. My thought is that as an investor, I can not participate in this name until we know more. Specifically, if there is going to be some action taken by the firm that might pressure margin going forward.
Boeing is a great firm, and not really an overpriced stock. Of that, I am certain. They will be back, and likely so will I, given my past tendency as an investor to gravitate toward aerospace and defense, and given the budgets still slated to reach that end. That day is just not today.
Those Long and Hurting...
Long and wrong? Consider selling a January $325 call. Those are still trading at close to 12 bucks. Knocking $12 off net basis (one contract per 100 shares) doesn't sound too bad right now, does it? Besides, this adds no capital risk to the trader's situation.