Update: Apple & Boeing – Here’s What to Do Now with the Rest of Your Money!
There’s a formula to wealth, and I know it.
More importantly, YOU know it by virtue of being a member of the Total Wealth Family.
I’m thrilled you’re here because what happens next with two of the world’s most talked about stocks is going surprise a lot of people.
We’ve talked about both Apple Inc. (NasdaqGS:AAPL) and Boeing Co. (NYSE:BA) a lot in recent months because they’re important stocks, both in terms of their contribution to the world’s economy as well as their place in your portfolio.
They’re “bellwethers” – meaning that Apple and Boeing set the tone for what happens in the world’s financial markets next.
Just not like people think.
The term, in case you’re interested, actually has medieval origins and comes from the Middle English spoken between the Norman Conquest in 1066 and the late 1400s.
Bellwether initially referred placing a bell around the neck of a wether (an old way of saying castrated ram) to lead a flock of sheep so that the sheepherders could keep an eye on their animals, via sound, even when they couldn’t see the animals themselves.
Today the term is widely used in the world’s financial markets to denote how the markets move when impacted by news, earnings, or other reports surrounding leading stocks like – ta-da! – Apple and Boeing.
That’s where it gets interesting.
Apple blew the doors off earnings Tuesday as expected.
In fact, I told you just last week that I thought Team Cook would post numbers topping “$4.80, or possibly even $5 a share,” versus expectations on the street of $4.53.
Apple posted $4.99 a share, a penny less than my most aggressive estimate – which just proves that you can’t win ’em all as the old saying goes!
Shares, of course, jumped, and Wall Street is already falling all over itself to catch up.
Thing is, they’re still missing the point we’ve talked about for years, not to mention the single biggest reason why Apple will be $400 a share or more a year from now. I went into this in great detail on Cheddar Wednesday morning, and I think you’ll enjoy this clip of the interview.
Here’s the long and short of it, in case you’re bandwidth challenged or just don’t have the time to watch for whatever reason.
Apple’s future is two things:
- wearable devices; and
- the procurement, management and manipulation of the data that they generate.
The company now produces more money from “wearables” and related items than it does from computers, some $10 billion versus $7 billion. Wall Street thinks “so what?” because the total tally is still only about 10% of total revenues, or roughly $10 billion.
That’s where they’re off the rails.
Apple estimates the medical devices market could be 3x the entire global iPhone market which means we’re talking about $167.88 billion. Tim Cook is on record saying he wants Apple’s “greatest contribution to mankind” to be its health-related service.
The fact that Wall Street doesn’t see the shift coming is your entry. I cannot stress this enough, which is why I talk about it to the point where I’m sure I sound like a broken record.
My point is that you may never see another chance like this, so do yourself a favor and get on board now.
Buy Apple shares directly, through a mutual fund or ETF, or even one share at a time, if that’s what makes sense. Whatever you have to do that fits your individual risk tolerance, financial situation, and objectives.
Boeing, unfortunately, has the opposite problem
The company just posted its first annual loss in more than 20 years as a result of the 737 MAX situation.
According to the latest data, Boeing suffered a $636 million loss in 2019 which, if you keep track of these things like I do, is a jaw-dropping swing from the $10.46 billion in profits it reported in 2018.
Costs associated with the MAX situation are now double initial projections and that amount already includes a $2.6 billion pre-tax charge to compensate 737 MAX buyers for the grounding that drags on… in addition to the $5.6 billion pre-tax charge it already took.
I think shares could drop under $200 before the situation stabilizes.
Not really – the situation reminds me very much of other American Icons that lost their way including Sears, GE, and Kodak. Traders will do everything they can to separate you from your money in the meantime.
Most investors don’t see this coming any more than they saw the companies I’ve just mentioned falling from grace. And that, ironically, is what makes the situation so very dangerous for your money.
Boeing’s newly installed CEO, Dave Calhoun, says the company will continue to pay its dividend for the foreseeable future but I have a hard time imagining how that’ll happen. Cash is cash, and you can’t fork over what you don’t have.
Bad headlines impact investor psychology and they’re rampant at the moment.
…Boeing took a $410 million charge to redo failed astronaut flight tests if NASA says so…
… the company is considering another 787 Dreamliner production cut…
… DirectTV’s Boeing-built satellite suffered an unexpected malfunction and experts are worried it could explode in orbit…
What you’re seeing now is just ripples of a far deeper, potentially far more financially devastating story playing out in the C-Suite.
Boeing is so much more than just the 737 MAX, so it pains me to say this, but the company has bumbled through the MAX crisis like Mr. Magoo, a much-loved cartoon character from my youth.
I believe the company will be a great value play if the FAA lets the 737 MAX fly again. But, that’s a big “if.”
Absent that, Boeing stock is a financial albatross and a risk you don’t want in your portfolio when there is plenty of profit potential available elsewhere. Like Apple.
That’s why I don’t recommend buying Boeing at these levels until there’s clarity on the 737 Max situation AND the coronavirus, both of which could severely impact the stock.
If you own Boeing, consider selling into any sort of strength, or at least lightening up your portfolio to lessen the risk associated with it.
Common sense goes a long way when it comes to investing.
Until next time,