Horizon Kinetics LLC, a New York-based investment advisory firm founded in 1994, released its Q1 2020 Commentary – a copy of which is available for download here. It has over 70 employees and is led by Murray Stahl. Its investment strategy is long-term and contrarian oriented, and the fund usually holds a concentrated portfolio with original stock picks.
In the said letter, Horizon Kinetics highlighted a few stocks and Boeing Co (NYSE:BA) is one of them. The Boeing Company is an aerospace firm. Year-to-date, BA stock lost 57.7% and on April 28th it had a closing price of $131.30. Its market cap is of $78.0 billion. Here is what Horizon Kinetics said:
“A better opportunity would be Boeing. Boeing stock dropped over 50%, mostly on well-publicized safety problems with its 737 Max jet, not because of the generalized market decline. You can see that on the accompanying chart, since the other two major defense contractors did a bit better and a bit worse than the S&P 500 – whatever that says. Since Boeing’s commercial airline business is roughly 50% of its revenues and earnings, that $90 or $100 billion loss of market value pretty much effaced the value of the airline business. As if it’s worth zero.
Maybe it is worth zero, in which case Boeing is trading more or less at the value of its defense business. But if the commercial aircraft business recovers – which it almost undoubtedly will – then you have that optionality. Which brings us back to the planes: if the country needs the planes, although not any particular airline, then you own the company that makes the planes for whichever airlines are operating. Somehow, I don’t think we’re going to be buying all our planes from Airbus. We bought a very small amount of Boeing in Core Value and Strategic Value. Not a lot, because it’s not the kind of business we want to fill our portfolios with. But as an opportunistic purchase, that’s more our flavor.”
In Q4 2019, the number of bullish hedge fund positions on BA stock decreased by about 1% from the previous quarter (see the chart here).
Disclosure: None. This article is originally published at Insider Monkey.