In the old days, pilots had a saying: “If it ain’t Boeing, it ain’t going.” Nowadays, Boeing Co (NYSE:BA) stock is certainly going. Boeing stock is the best performing stock in the Dow Jones Industrial Average and it is up a whopping 70% year-to-date, all while delivering a 2.2% dividend.
It’s also interesting to note that BA stock is the most expensive stock in the DJIA. And the DJIA is a price weighted average.
That means for example, a $100-a-share stock has 10x the influence on the average than a $10-a-share stock. Or in the case of Boeing stock, it has about twice the influence on the DJIA than stocks like Caterpillar Inc. (NYSE:CAT) or Johnson & Johnson (NYSE:JNJ) and almost 10x the influence of General Electric Company (NYSE:GE).
Because of this antiquated way of valuing the index, BA has been the leader in driving the DJIA up to the record levels it’s at today.
But it isn’t a magic act that got BA stock to the levels it’s at. That is the most impressive aspect of this move.
The Truth Behind Boeing Stock
Boeing stock is flying high because commercial airline orders are booming. And there are two very real and significant drivers to that.
First, the existing fleets are getting old. They have been in service for decades, but older planes are far less fuel efficient than newer planes and it’s actually now cheaper to replace aging jets than it is to keep them running.
And given the fact that fuel prices have been low for quite a while, it’s the perfect time to replace them as airlines have more money on hand and lower interest rates at which to borrow to build out their fleets with a new generation of more efficient and reliable planes.
The second driver for Boeing stock? Air travel is growing in developing nations like China and India (close to half the population of the world) for both leisure and business. In developed countries, air travel is making a comeback, which is helpful as well. But the biggest boost in the global dynamics of air travel is logistics. Shipping goods around the world by air is becoming more efficient and necessary for many businesses.
And all this is reflected in BA’s growing back orders and continued cash flow expansion.
Bottom Line on BA Stock
Its once-mighty defense and aerospace work is falling by the wayside as commercial aviation is becoming the major force. Also, its services — parts, equipment, maintenance, etc. — will also start to expand as sales continue to grow.
In that services division is also analytics — poring over all the information modern systems deliver back to the company. That can get broken down and parsed to find better strategies for maintenance and upgrades, helping keep the planes working better and longer without significant down time.
In its most recent earnings announcement, BA stock officials continually talked about how this trend will last through the end of the decade. And it’s likely to last even longer.
Don’t be put off by this big run, there’s a lot more where room for Boeing stock to go.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.