Investors may be wondering how long Boeing’s (Boeing Stock Quote, Chart NYSE:BA) current troubles will weigh on its share price, but while it’s unclear exactly when the recovery will come, recover it will, says investment manager Norman Levine, who likes the stock as a long-term hold.
“Traditionally, we like to buy stocks that are down-and-out for a temporary reason and I would classify Boeing in the category,” says Levine, managing director at Portfolio Management Corp, to BNN Bloomberg on Wednesday.
“Long term, there are basically two airplane manufacturers in the world and they’re the biggest and that’s not really going to change. Boeing is going through this problem and it’s open ended as to how much it’s going to cost them and when it’s going to be resolved,” he says. “We haven’t stuck our toes into this yet but if you’re a long-term investor and are willing to put up with the ups and downs of uncertainty, by all means, it should be fine.”
More news arrived this week concerning Boeing’s 737 Max 8 aircraft, which was involved in two fatal crashes within the span of months, leading to the grounding of all Max 8’s since mid-November. On Tuesday, the US Federal Aviation Administration released its initial review of Boeing’s update to its Max 8’s anti-stall software, thought to be a factor in the two crashes. The FAA determined that the updated software was “operationally suitable,” while at the same time recommending that pilots of the Max 8 take further computer-based training on the plane’s automated flight system. Boeing’s stock rose two per cent on the release.
Then on Wednesday, two US shareholder advisory research firms are calling for a shareholder resolution that would split Boeing’s CEO and Chairman positions, currently both held by Dennis Muilenburg. The two firms, Glass Lewis and ISS, said that “shareholders would benefit from the most robust form of independent oversight to ensure that the company’s management is able to regain the confidence of regulators, customers and other key stakeholders.”
Boeing’s share price has dropped nine per cent since the second crash on March 10. The stock remains up 17 per cent year-to-date.
Reportedly, Boeing has trimmed its production of Max 8’s by 20 per cent, while this week, Wells Fargo said that the issue is likely to slow US GDP during the second quarter by 0.2 per cent.
Levine says that Boeing’s share price will start to rise once the company resolves the software problem.
“They’re not going to take all of those planes permanently off the market. They will fix them,” he says. “And they have all of those orders. Some of them will disappear but most of them will stay around. [The stock] is not going to go up in a hurry — you’re not buying this for a quick flip.”