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What can investors take from Boeing’s latest midair disaster

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Sabourin cites the past five years of performance between Boeing and its sole competitor. The American airplane manufacturer is down around 35 per cent over that period, while the Anglo-French Airbus is up almost 62%. Boeing has been bleeding cash for years while Airbus has made as little noise as possible, which is what investors tend to want from their airplane manufacturers.

Read more: The 2023 market was full of surprises, but what lays ahead? | Wealth Professional

Nevertheless, Sabourin sees a potential long-term value play in Boeing’s stock now that it faces a renewed challenge. Airline manufacturing is essentially a duopoly between these two companies, it’s very hard for smaller players like Embraer or Bombardier to manufacture and maintain the kind of massive jet aircraft that Boeing and Airbus make. That means Boeing still probably has the scale and competitive moats to weather its current weakness and resume its place in the market. If an investor is prepared to weather shorter-term volatility and medium-term underperformance, they may be rewarded in the long-run from an allocation to Boeing.

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The disaster has also impacted the stock performance of some of the airlines operating these planes. Sabourin attributes that more to the impact of ETFs than an expectation that this accident will cause a meaningful shift in demand for flights. Many investors and even institutional managers now hold airline and airplane manufacturing stocks inside ETF packages. As calls went out to sell Boeing allocations, Sabourin says that included many ETF allocations that held positions in airline companies as well.

While some investors might cite Boeing’s considerable defense contracts with the US government as evidence of its long-term sustainability as an investment, Sabourin believes that there are other potential players in the defense industry that could be a better play. Lockheed Martin, for example, doesn’t have the same issues with cashflow. Government contracts on the whole can also prove challenging for investors given their more fixed terms.

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