27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.
The Boeing Company (NYSE:BA) has been one of Wall Street's favorites. In the past two years, the industrial giant's shares have jumped nearly 150% from the $130 mark to around $330. However, the favorite trade, of late, has begun to unwind as fears of a full-fledged trade war escalates.
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The United States is planning to impose hefty tariffs on a series of Chinese products due to the country's "illicit trade practices." China hit back with the announcement of tariffs of up to 25% on 106 American products including airplanes with empty weights between 15,000 kg and 45,000 kg. This naturally sent Boeing's stock spiralling down more than 10% from the all-time high scaled this year. After all, Boeing has high revenue exposure to China-based customers.
Such bitter tariff talks, however, are overblown as in reality it will affect only a limited number of Boeing jets, while the aerospace giant's fundamentals remain strong. Here's a detailed look.
Trade War Fears Overhyped
The tariffs announcement will affect Boeing's 737-800, 737-700 and 737-900 ER models as their operating empty weights are in the range targeted by China. But, Boeing is aiming to phase out all these models as soon as possible. These models will be replaced by the 737 MAX 8, which flaunts a heavier state-of-the-art engine with an operating empty weight of 45,070 kg. Such a weight will help the model to be just beyond the reach of China's tariffs. To top it, Boeing's larger airlines such as the 737 MAX 9 and 737 MAX 10 models will no doubt have operating empty weights above 45,000 kg.
Market pundits also believe that tariffs are only applicable for new orders and won't impact Boeing's existing backlog in China. Boeing, in the meanwhile, is constructing a 737-completion centre in Zhoushan, where almost 100 planes will be delivered to Chinese customers annually. Completing such aircraft in China will surely help it to stay away from the purview of tariffs. But, the big takeaway is that China's fleet has around 3,000+ aircraft. This fleet size remains insufficient considering China's ballooning population. Thus, tariff talks may have dented Boeing's stock for the time being, but underlying demand signals higher production in the long run.
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Fundamentals Remains Solid
Fundamentals in the Boeing's core airline market are strong. First and foremost, the economy is growing at a steady pace both at home and abroad, while consumers remain optimistic about their financial well-being. Both of these provide enough tailwind for Boeing's business.
Second, Boeing is a big gainer from the tax overhaul policy. The latest tax law was a massive tax relief for the company as it will now be paying between 8% and 15.5% instead of the earlier 35% for bringing back money held overseas.
Third, international tensions are rising, if we look at North Korea, Russia and China. This is compelling many countries to bump up their defence spending. With military outlays on the rise, we are looking for a streak of growth years ahead for Boeing.
Boeing Stock Verdict
Boeing's fundamentals remain strong amid elevated trade tensions. The company may lose some business in China, but, beyond that the growth narrative remains impressive. Moreover, trade concerns are just an isolated case and there is much ado about nothing. Especially considering the company's expected earnings growth rate for the current year is a solid 16.7%, and 13.8% compounded annually over the next five years.
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27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.