All right. Hi guys. So if you’ve been reading the news you know the tragic news about another Boeing plane going down. Basically, a couple of months ago Lion Air flown by the Indonesian brand crashed after just 15 minutes in flight. It’s a brand new plane, a Boeing 737 MAX 8. So, and what happened was just a couple of days ago another airline, Ethiopian Airlines, went down as well. 15 minutes after the flight started again brand new plane Boeing 737 Max. So is this a coincidence? No one knows for sure but it doesn’t look too good for Boeing. So as a result what has happened is Ethiopian Airlines decided to ground all their 737 Max 8 planes out of safety concerns and China ground all the planes as well. And eventually now it seems that you know China, Indonesia, Ethiopia, Europe, have all grounded their Boeing 737 MAX planes. The only country that is not grounding the planes is the U.S. They refuse to ground the plane saying that the planes are safe and so and so forth. Now I don’t know, I think the Americans got really big balls or they’ve got a lot of faith in their pilots. But as a frequent flyer myself flying almost every week I would not dare to get on this plane until someone figures out know what’s going on. Because you know for planes to take off and then crash within 50 minutes clear skies no weather problems. You know something’s wrong that plane. So I’m not downplaying the tragedy of this, it is really tragic. And my heart goes out to the families. At the same time if you look at it from the stock perspective, is this an investment that you can make in Boeing. Would this as a result Boeing stock prices has crashed let’s take a look at the stock price. So in fact Boeing stock has been one of the best performing stocks in the Dow Jones for the last 10 to 20 years. It’s been doing really really well, and it reached the high of over here at about $445. And once the news was announced you can see that we had about an 18 percent crash. Now it’s down about $375. So the question would be you know is this a time to buy Boeing shares. Now as I’ve said before in the past no matter how good a company is, in the long run it will go up in value. But in the short term you’re going to have all kinds of tragic news. Whether it’s a food company getting like McDonald’s went through the food scare, so did Yum Brands you know when there was a food scandal in China. Facebook had a data scandal. Right. So all good companies will go through bad news and in those moments, those could be times to buy the stock at a huge discount. But there are times when you should bail on a stock and saying that you know this is not something I should buy. So I’m going to analyze Boeing from an investment perspective. Is this a stock that is worth buying at these prices or should we wait for further downside. Now as you know I did a couple of videos similar to this recently. One of it was Facebook. Again Facebook had a big crash after a data scandal and I said I am buying Facebook because it’s a great company. It was a fantastic opportunity to buy Facebook shares dirt cheap which I did and I’m making money on Facebook shares. And then a couple of weeks ago, we had Kraft Heinz owned by Warren Buffett that came out with really bad news, bad earnings, cut their dividends and the share price crash as well and I said for that one I’m not buying because I don’t think that is a good company in the first place. It was a good company but not anymore. So do I think that Boeing is a good company and do I think that the shares are worth buying at this price. Well first of all let me just say that I think that Boeing is a great company. It’s a fantastic business. In fact I have been investing in Boeing in the past. And in fact I sold, you know I bought it at about 200 dollars to 250 thereabout and I sold it at about 420 dollars. I sold it somewhere there just before the peak and that crash. So in fact this was the statement over here. I was not holding a big position it was very small position in my portfolio. So I actually bought using the CFD. So that’s BA, that’s Boeing and you can see that I exit, I got out of the stock at about $427. It was a small position, only seven thousand dollar positions so I just made just a small profit of you know a thousand two hundred dollars there. So a lot of people who are my students they said hey how did you know that the stock is going to crash. I didn’t know the stock is going to crash. How did I know that. Right. So how did I in the first place. Why did I sell it at $427. I sold it, let me just zoom in over here. I sold it at $427. Yep I sold it right there. So how did I know to sell it there. All right before this happened again I didn’t know this was going to happen I can predict the future. And now the reason I sold it is very simple. I sold it simply because I thought the stock was a bit overstretched. Overextended. Now remember that no matter how good a business is, usually I’ll just hold the stock. But when a stock gets overextended, when the price moves too fast above the moving averages it tends to snap back towards the moving average. Remember that moving averages act like a magnet. Every time the price goes too far, it snap back, snap back, snap back, snap back. It will always snap back to the moving averages. The moving averages take a big magnet. So whenever I’m in the stock, and I see that the price goes up, kind of like 90 degrees, it’s like over, it’s like a rubber you know stretching it is going to snap eventually. And once I see the price is getting very far from the moving averages what I’ll do is I won’t sell immediately. What I’ll do is I’ll place a stop loss above the recent candles. Now normally for my investments I don’t place a stop loss. But if I see that the price is overextended and I’m already making a pretty good return, you know I’d like to put a stop loss to protect my profits so that if my stop loss gets hit, I get out and then I wait for the stock to crash back down and buy it cheap again. So I do that for all my stocks. So in this case where it kind of went up so much I started raising my stop loss to below the candles the low of the candle, the low of the candle until it went down and hit my stop loss I got out at $427 thereabout and then the thing came crashing down. So the fact that I was in initially tells you that I knew it was a good business and I still think is a good business. And I see this as a chance to actually buy the stock at a discount. although I must say that I think that we could get even bigger discount in next few days. So let me run through with you my thought process. So first of all how do I know it’s a good business. I’ve mentioned this many times in my past videos that before I invest in a stock it has to pass my seven criteria and it’s something which I teach in my value momentum investing course that you have to pass these seven criteria for it to be a good investment. And the first criteria I look at is I only invest in companies that have got a history of consistently increasing sales, net income and cash flow from operations. So let’s take a look at Boeing and does it meet those criteria. All right so that is Boeing over here and this is the revenue, by the way I’m looking at the Morningstar, which is one of the main websites I use. I think they’ve got great data. So thank you to Morningstar. Just say that right. Okay. So I’m looking at the last 10 years of data. Let me just.. Ok so I’m looking at the last 10 years of data and you can see the revenue has been increasing almost every single year. You can look at all the figures over here but easier to see it visually. So there we go tadah! so you can see the revenue has been increasing pretty consistently for the last 10 years and I only invest in businesses with this consistency in revenue growth. Now the next thing I look at would be the net income growth over here which is the net profit. Again you can see very consistent growth in the last 10 years. And again I only invest in these kinds of companies with very consistent growth. Finally I look at cash flow to ensure that the cash from operations is increasing consistently as well. There you go. So this is cash from operations, increasing consistently as well. So that passes step one. Okay. And I can tell you that out of the 7000 stocks in the U.S. less than 5 percent would pass my first step. Less than 5 percent. So from this first step alone you can eliminate 95 percent of all companies in the U.S. If you look at other countries like for example Singapore where I am from I think less than 1 percent of companies pass the first step. So 99 percent fail my first step. And that’s why in the whole of Singapore they’re only less than 3 companies I would invest in and I wouldn’t tell you what they are until you come to my course, live (workshop), I’ll tell you what they are. The rest of them fail my first step. But again bear in mind I’m talking about investments here. Trading is different. Trading is like a one night stand. Just get in, get out. Now for trading, yeah there are many stocks I’ll trade but I’m talking about an investment. Something that you’re going to be in the company for the long haul to watch it grow in your portfolio. So the point is Boeing passes my first step. Second Step. I only invest in companies with high future growth rate that the company is poise to grow in the future, preferably by double digits. So what’s the projected growth rate of Boeing. Here we go. So you can see that the long term growth rate of Boeing is projected to be, well the high estimate is 27.4 percent. The low estimate is 16.9 percent and the mean is 22.12 percent. So what this means is that analysts expect Boeing to grow at 22 percent year on year for the long run. So a 22 percent growth is a great growth rate for any company. So if a company has got a 5 percent growth rate I’m not interested. For example you know Johnson and Johnson recently they had this talcum, was it talcum powder had asbestos, it was some bad news and the stock price dropped. And I didn’t buy Johnson and Johnson because the growth rate is only kind of like 5 or 6 percent if I’m not wrong. So I’m not interested in a company that grows 5 to 6 percent. That means my money is growing 5 to 6 percent. I don’t want my money get 5 to 6 percent, I want my money to grow at 20, 30, 40 percent or more so that you know I can compound my wealth a lot faster. So 22 percent growth is reasonable for an investment. So that passes step two. Step three, I only invest in companies that have a monopolistic edge in the markets which means that I only invest in companies that have little or no competition. I call that a wide economic moat or a sustainable competitive advantage. So Boeing is one of those companies that is kind of like a monopoly. In fact Boeing has two businesses. They’ve got the commercial airlines, they’ve got the military defense. Commercial airlines. They’ve only got one main competitor and that’s Airbus. And Airbus has been having its own set of problems recently as well as you know Airbus their main big plane that was A380 or something just got canceled because not enough orders by countries, too expensive to run and they took a huge hit. So Airbus is not doing that well as well. And anyway Boeing’s a lot bigger than Airbus, the profits are double that of Airbus, so Boeing is basically a monopoly. You cant run away from that. You basically go to buy planes from them or Airbus. But again they’ve been beating Airbus. In the military part of it, Boeing just secured a pretty large contract from the Pentagon. And your main competitors will be Lockheed Martin that makes the F-35 fighters and Northrop Grumman. I don’t know how you pronounce that right. So again, Boeing is the leader in both commercial airlines and aerospace defense now. So when a company like Boeing has got a monopoly in the markets it’s very very clear because you’ll notice that they have very high net profit margins compared to the industry, you can see the net profit margin of Boeing 7 percent compared to the rest of the industry which is 6.3% percent. And the next thing that we look at would be.. All right so that’s step three, step three is the monopoly. I like that. Step four. I like a company that has got conservative debt relative to its competitors. So there are many websites which you can get this data from. Another website which I love, it’s run by good friend of mine. It’s called share investor. It’s actually from Singapore but they’ve got data from stocks all around the world. So let me just show you some of this stuff over here. Ok. There we go. So this is what we call return on equity or ROE. And I only like to invest in companies with consistently higher return on equity of above 12 to 15 percent. And you can see that for Boeing their return on equity has been phenomenal. 62 percent. 81 percent. 500 percent. 2000 percent. 3000 percent. So it’s crazy. So return on equity tells you as an investor the equity that you put in what return are you getting on your capital and it’s phenomenal. So you can see based on the numbers it’s a fantastic company. The only thing that I don’t really like about the company, the only thing I would say that it’s not as great, is that the debt levels are not low, pretty high. I can see that the current ratio of the company is still above one, which means there are more current assets than current liabilities. But it has been falling over the years, which means the company is making use of more and more debt to fund their business, hence the high return on equity. The debt-to-equity ratio you can see, has been also increasing quite high. So that’s the only thing I don’t like about this company that has got pretty high debt. Will I still invest in it? Yes I would, for a very simple reason. Boeing is one of those companies that is too big to fail. It is too big to fail. So normally when I invest in a medium sized company and they’ve got high debt, I will avoid it. But Boeing is one of those companies where they’ve got high debt you know, no worries. They’re too big to fail. So like I had said, that’s the only thing which I don’t like about the company. But besides that, it passes all the rest of the steps. Consistent historic growth, high positive future growth rate, wide competitive advantage, high return on equity. The debt is a bit high. That’s the only thing about it. Now the next question would be, is a great business. What’s the valuation. What is it worth. And I use an intrinsic value calculator, to calculate the valuation. And again it’s something which I teach in my course whether my live courses at wealth Academy in Asia or my online courses like the value momentum investing course where my students get this calculator where you can put in all the data which we just covered. And you’ll calculate the intrinsic value. So you can see the intrinsic value of Boeing is $493. That is the valuation of Boeing. And again I only like to buy a company if I’m getting a great discount. If I’m getting a 20 or 30 percent discount off the valuation i’m buying it undervalued, that’s how I know I’ll definitely make money. Because in the long run, the company shares would always increase in value but if I can get it at a discount I make even more money on the company. So again let me write this down, $493 is the intrinsic value. And let’s go back to the stock chart and let’s take a look at where the stock is right now. So right now is at $375. The intrinsic value is about 500 bucks, about here. So it’s selling at 14 percent discount to valuation. So, there is nothing wrong with buying the stock at this level. But you know what. I’m gonna wait a bit more I’ll tell you why. Now let’s assume that the shit really hits the fan. And people stop, airlines stop ordering this 737 Max 8, instead, they start grounding the planes and Boeing gets hit by with lawsuits. So in that worst case scenario, what is gonna happen to the company? Now, roughly about 30 percent of Boeing’s revenues come from this plane model. So let’s assume they lose 30 percent of their revenues. So let’s give this $493 a 30 percent haircut discount because of the loss of revenue from the model. So $493 x 70 percent, which is 30 percent discount would be $345. So assuming that people are not going to buy this plane anymore until they sorted out, the shares could be worth $345. And currently it’s selling at $375, which means that we could kind of like wait for another 30 dollar drop before we start accumulating the shares. So this is approaching it from a fundamental perspective. Which is $345, would be a pretty safe level to get in. So at $345 you can see the total discount you’re getting off the intrinsic value would be 30 percent down of the intrinsic value. Now, I’m not just a value investor. I’m a value momentum investor which means I like to look at charts and technicals. So, let’s take a look at the long term performance of this stock. I’m gonna go to the 10 year price chart. So you can see this is Boeing’s performance over 10 years. And like I said, when you invest in a great company you know that in the long run it’s always going to go up. It’s like 99.9 percent guarantee is gonna go up as long as the fundamentals do not change that much. So can see over that now. But you can see over the last 10 years it had big corrections as well because of previous bad news. Financial crisis or whatever it may be. So if you take a look at previous crashes, so this now looking back it seems small but if you zoom in, it was big at that time. So you can see that from the top, it had a draw down before it recovered. So this draw down was 33 percent. And from there it had another draw down of 19 percent. And from the top to the bottom over here. This was a 34 percent draw down. And from the top here to here, before the recent crash this was a 25 percent draw down. So this is one of the things I like to do when I look at stocks, how they behave in the long run. So you can see that for Boeing historically during a crisis the stock drops by 33 percent here, 19 percent here, 34 percent here and 25 percent here. So what does it tell you? It tells you that once the stock drops between 25 to 34 percent, that’s the buy zone. You know that it’s reaching near the bottom. I mean we can’t catch exactly the bottom, but if you look at the statistics of past behaviors that’s how you know the time is right to get in. So in other words, I’m looking for 25 percent to a 34 percent correction of the recent highs. So again based on technicals where was the high here? The high was $440 right there about so. So if you take a 25 percent off, what’s that? That’s $330. Which is somewhere over there, 330 dollars. Which is pretty close to the same price that I got from the fundamental perspective. So you can see that when you analyze a company from both the fundamental perspective and the chart technical perspective, and it get pretty much the same price entry, you know that you can’t go that far. So having said that. So the point is this. I’m going to wait for you know $330 $345 to start accumulating this stock now. Does it mean that it’s going to get there? It may not. It may never go down there. it may you know just go up from there and then you miss the chance to get in. But as an investor you never have FOMO, which is the fear of missing out. Never chase a stock. Let the stock come to you. Be patient. If it meets your price, get in. if it doesn’t, fine. Move on. There’ll be another investment out there and that’s how I analyze my investments and that’s how I’ve been getting great returns on my portfolio by buying great companies at discounts. Hi so if you like the video you can subscribe for more videos by clicking the Subscribe button. If you want to find out more about our live training courses in Asia, go to wealthacademyglobal.com. For online professional Stock and Forex trading courses you can go to piranhaprofits.com. So this is Adam Khoo and I’ll see you soon.