Should You Buy Boeing Stock?
Weighing ethics against fiscal strategy is always tricky — here, the dilemma may be simple.
More than a year after the fatal Lion Air and Ethiopian Air crashes, not much seems to have changed at Boeing, aside from its stock price and media coverage. Events that cause human tragedy as grand and painful as this demand from us their use in bettering ourselves for a brighter future.
One positive from all this death has to be the learning opportunity regarding the ethics of continuing to buy Boeing stock. Full disclosure, I own a few shares myself. I constantly return to the question of whether this is just, or ethical, or even a smart financial move — divorced from the other nagging doubts.
My dad used to tell me to buy companies I would use on a regular basis. I believe this was repackaged from some old wunderkind investor writing in the 80s, but this advice has played a significant role in developing my own investment strategy over the years. Boeing breaks this mold.
After revelations surrounding the 10 March crash outside of Addis Ababa began surfacing, millions of flyers worldwide, including myself, began seriously considering the aircraft employed on transit routes we were buying tickets for.
This lack of confidence in the Boeing product signals to me a stock that should stay well away from my largely healthy portfolio. But the opportunity to buy an otherwise expanding business at a 35% rate cut and then again this year below the $100 mark (a 78% markdown from its most recent peak) proved too alluring for me — and countless others, according to trading volume data that pegs average movement between 80 and 100 million during these periods.
Moving away from the raw numbers though, I think it’s important to consider the total cost of investing in Boeing, not just the financial risk-reward trade off. Overall, the coronavirus downturn has sunk the value of my initial buy to a level that requires my holding of at least my initial shares for the foreseeable future. But it has also provided a unique opportunity to quickly move in and out of positions to maximize profit opportunities in the short term that wouldn’t be available otherwise.
I am constantly returning to the ethics of this approach. In March of 2017, I personally flew the segment on Ethiopian Airlines that crashed two years later, shortly after takeoff en route to Nairobi. The chance of an airplane crash is apparently one in 11 million, and yet Boeing Max 8s have been showing chronic signs of failure in the sky for months — if not years.
The Vox video titled “the real reason Boeing’s new plane crashed twice” asks us to think about this not as a failure in aircraft engineering, but one of capital competition. The video suggests to us that Airbus’ inclusion of a new engine design in their 2010 rollout prompted Boeing and the remaining field of smaller competitors to adopt the same measures to maintain market share.
Boeing, according to their research, strapped the new engine on an old plane and called it a day, forgetting about the aerodynamics of aircraft and the slightly misaligned strain a taller engine would produce on an otherwise perfectly distributed flying machine.
Coupled with the inclusion of minimalist cockpit tools given as standard with the aircraft, corporate buyers soon found themselves operating growing fleets of compromised equipment that began relaying faulty positioning stats to the onboard computer immediately after it took to the skies.
As investors, this begs the question, can we and should we buy into this business simply because the financials tell us its a sound bet? Devoid of any other considerations, I might personally be racing to buy up as many shares as I could afford. Currently, the stock sits around $134 with fair market value resting at more like $300. The long game seems to beg for action here if it were to be played as a pure exercise in capital gains.
But buying a stock conveys a faith in the product. When consumers open their wallets they are boldly stating two things: the first is simply the desire to purchase a particular product. If I need a new shirt, I buy a new shirt. But my choice to buy an Old Navy, or Brooks Brothers, or Bonobos product conveys my confidence in the value of a particular type of shirt.
Similarly, an investment portfolio is an exercise in consumer confidence. The stocks that we buy and sell suggest to others the mental gymnastics we are going through. Buying trends signal to the market that a stock is undervalued, but more importantly, buying suggests that the company is undervalued.
In the year since public outcry has taken Max 8s out of service worldwide, Boeing has had unending opportunities to make it right.
Executives have testified before congress and scientists have worked day and night to fix the flawed guidance system that continuously forced aircraft noses back down to earth as crews desperately fought to gain altitude off the runway. All through this process, FAA oversight has found the manufacturer to be unrepentant about their sparse safety standard inclusions and lackadaisical in their efforts to build a new guidance product that airlines and passengers can have confidence in when they take their seats.
Above and beyond the casualization of death aboard a Boeing, Chinese, government-owned manufacturers are silently making a play for market superiority in the coming decades. Chinese air travel is projected to surpass the American market in the next few years; and as confidence grows in Chinese-made airplanes (albeit, still in development today) it is plain as day that the share of Boeing and Airbus brands in the Asian market are quickly approaching a cliff.
I am just one investor, but I don’t believe Boeing has earned my confidence as a buyer.
The company has shown a morbid recklessness with the lives of its product’s end users, and market threats to its model suggest that inflated price targets for the future may be just that, inflated. Regardless of whether Boeing has the potential to make a run on its pre-crash price point or not, I plan to stay away from future buying opportunities for a company that hasn’t earned our business.
