And That's Why Due Diligence Exists! Boeing (BA) Stock Analysis | Martin Shkreli

Boeing 10K all right we're going to look at Boeing a lot of people want me to look at Boeing let's read the 10K together this is the first thing Warren Buffett does when he looks at a stock here he's a 10K can't be that bad of a first step right I like to keep my notes in a file does it help you guys remember things I remember things whether I not I take notes I think it's good for collaborative work too like um if you have a team this is one of the better methods because your team can put their notes in and something like that if you don't take notes you lose the information from period to period it's pretty hard to analyze these you'd have to open up every 10K and stack them up against each other it seems a little impractical so better way to do it is to do it the way I'm doing it right now all right so at least it's at at the time of the 10K they had there was more recent information but at the time of the 10K they had 610 million shares outstanding it's 175 bucks a share so that's 100 Bill market cap that's Boeing ba classic stock I haven't been following the company for that long but I I've certainly looked at it for about 25 years um but never in great detail you know uh so I'm not going to pretend I was a Boeing analyst I think for a hot minute I I did look at defense stocks but not not that in depth it's funny because even even with all their problems they they haven't really guess B split a bunch of times right so like in the 70s it was like a dollar kept going up in the 90s it was like $36 in the.com bubble Peak it was $40 kind of crashed uh to $20 went up all the way to 70 or $80 and was this when their problem started no that was just the great financial crisis back down again to $20 huge run huge run to 200 even From 20 to 400! $400 wow wouldn't have been amazing to buy Boeing it's 2009 the financial crisis is over theoretically um nobody has any job or money but imagine you had a big pile of money and you bought you just said you know what I just want to buy American classic American stocks so I'm I'm going to buy Boeing and you bought a bunch of Boeing and maybe you bought Coca-Cola and fizer and all the stuff but your Boeing stock would have gone from 20 400 holy moly in just 10 years wo you don't see that often yeah you know and it's not like some kind of high tech Growth Company like this is a company that is very old and whatever okay so then the stock kind of crashed I guess because of various um problems with the the company's quality okay okay so so Planes in development now we're left with a100 billion company what does that mean they have commercial airplanes that's one business they have defense space and security that's another business and then they have Global Services that's their third business all right so for airplanes pretty their easiest business to understand you've got 737 narrow body 767 wide body 777 widebody and 787 y body they're working on couple other planes the 777x 777x in development uh the 737 X 7377 in development and the 73710 in development for defense they do what you would think aircraft manned and unmaned Commercial satellites Global Services this is just servicing the other two businesses they really have two businesses in a Way 171,000 employees and a bunch in the union 57,000 union members all right so they finally look at that they listed SpaceX as their competitor Airbus is basically [Music] they're Airbus and some Chinese companies and then defense they've got locked Northrop what's Northrop stickers still NC rathon General Dynamics and SpaceX all right so the 7379 is there's a ton of problems there and then you have the 737 Max Bo was founded in 1916 110 years old almost so the F FAA is a regulatory body for them non us customers accounted for 42% of our Revenue that's more than I would have thought actually 37% US Government contracts so I'm guessing for defense the entire thing is US Government contracts Okay so we've got the the KC 46a tanker the mq2 the t7a Redhawk the vc25b presidential aircraft I'm guessing that is also called Air Force One let's see vc25b residential aircraft oh this is the military version of the Boeing 747 so that is also called Air Force One military 747 tail number 28,000 air traffic is back to pre-co levels even though I guess China is not Airline financial performance I guess it's quite important for them industrywide profit of 23 billion that's more than I would have thought 42,000 new airplanes over the next 20 years okay 4255 new airplanes needed globally in the next 20 years this is the 2023 10K okay here is like a brief description of the companies really really Revenue is growing Abridged so they've grow they've been growing Revenue where's all the hate coming from why are there so many haters Revenue was 62 billion then 66 billion then 77 billion okay haters plebs get mad I'm not sure about the profit or loss I want to look at the cash flow you know what they call me okay here's the disaggregation of Revenue oh no my windows went crazy airplanes 14 billion 26 billion 34 Cashflow billion defense 26 billion 23 billion 25 billion okay Services 16 billion 17 or 18 billion and then 19 billion oh by the way guys I did um I co-hosted pirate wires so pirate wires is like basically I guess Peter Teal's Media company or Founders funds Media Company it's very cool very edgy and I co-hosted it this week so check that out comes out should be coming out later today so at least on a gap basis all these businesses are [💎] Gaap (running at a loss) seem to be running at a loss but all of you guys know that that's not always the full story because you're smart and you know Finance cuz you watch me and you're not a noob all right so this is the airplane backlog which has grown enormously the defense backlog and then Services backlog backlog is how do they Define backlog actually it'd be interesting different compan compies Define it differently unfilled orders definitive contracts have not been executed customers have the unilateral right to terminate this is very important here this is airplane deliveries so we're going to 737 deliveries they delivered [Music] 396 8 uh 387 and 263 okay that looks pretty good 770 747 deliveries look looks like they don't do many of these they delivered like none is that cuz is that the max or I don't know it says here I guess the what is the 747 bowling 747 long rage wide bodied airliner oh they no longer make it it's the OG plane got it 767 oh is that oh I see that's just the that's just Air Force One got it got it got it I'll buy a 74 747 when my puts print this guy is a fool fo Julio foolio all right 777 and then the 787 so if you look at how many planes they deliver in a year it's not that many these are pretty expensive little so let's see total airplane deliveries right is like delivering Cumulative orders (important) pizza 340 480 528 if this was a startup that'd be a lot of growth but I'm guessing 2019 and 2020 wasn't so good but we'll see so do I have those right 340 480 528 cool so these are firm orders cumulative firm orders H I don't know if I could I don't know how to parse this this seems strange cumulative first firm orders these are orders that acrew since the start of the project without deliveries we have cumulative deliveries too right but is it cumulative net firm orders I guess a firm order you can't cancel right tell you what I'm just going to do the cumulative firm orders for the 737 because that's the biggest one and if it's important I will go back and finish the job but I'm a little mystified as to how this will be useful but that's because I'm not in defense and Airline uh defense and air aircraft analyst okay [💎] Military sector now we have the military side it's going to be this is like a biotech income statement so many different products or big Pharma more likely okay so the fa8 what is that McDonald Douglas that was an old uh company Boeing bought a long time ago 1997 McDonald Douglas merges with Boeing so are these all Hornets or are some of them hornets and some of them aren't we got the 18c supersonic so this would be a really cool industry to follow professionally you know imagine going to the Boeing uh headqu ords and they're like take a look at this the new fa19 and you're like holy and you have to get like security clearance to see it like the CEO is like you want to take a ride let's go we'll go through the whole the whole list of products so they said they they plan to use the fa18 until the early 2030s it's the USMC guessing it's the US military command or something like that okay so the 18 CND one crew member 56 ft how long is that height 15 ft you got to be a short guy to fit in there short King so let's see if you had to scramble me from DC how fast could I get to New York DC to New York miles oh that's short uh 200 miles so you can cover that in what what the top speed is right it is 1,190 Miles 2041 907 [Music] 17 time 60 minutes so 10 minutes from New York to uh at at full speed with no takeoff or Landing kind of now I need that for my Miami trip I don't think you want to be in that at Mach 1.8 [Laughter] either and for all you people wondering like you could study all these and [💎] You can be a valuable nerd if you study this sector become like an independent analyst or join a hedge fund or mutual fund and just be like like you're the nerd you're the autistic nerd who's like well technically the F-18 uh range is smaller than the F-15 and it uses the Hugh avionics to the Boeing avionics which gives it superiority and like people some hedge fund manager who's like was a jock in college would be like we need this kid and then like they'll put you in front of Boeing and Boeing will be like how do you know so much about our planes young man you'll be like I don't know I've always been fascinated by them they'd be like maybe you want to jum with Boeing and believe me that's how this works that's how I did Pharma in in Pharma I I was exactly the same way talking about every medicine talking about every they stopped shipping that or they're slowing down the shipping of that now the t7a Red Hawk this is a training system they've got two kinds of Chinooks I'm going to group those for Simplicity sake all right now we get the Apache so the Apache is a helicopter that's a flex you know These Guys these rappers and your Tate they're flexing Bugattis or whatever man I got the Apache oh I want to know the price of all these as well you can buy an Apache I don't think you could buy an Apache 52 mil I mean if if you have a billion cash that's not bad Hellfire missiles need those these are million a piece I think although andal is probably going to make better ones Ander is the exciting company in defense maybe Boeing should buy andal and make Commercial sat destroyed by spaceX Palmer the CEO of Boeing now that would be sick um commercial sets so the commercial satellite business they've probably been destroyed by SpaceX right and on the military satellites they haven't done any either there so SpaceX has just been whooping in general okay this is their earnings from operations for services right right now the important part cash flow it's [💎] Financials (now for real) not bad but they have kep backs thing about Boeing is that it's kind of too big to fail in a lot of ways it's like the government sweetheart like if you work in the government there's always a job for you a Boeing if you're in DOD or stuff like that oh that's interesting someone's saying that the satellites are different heights fair enough I suppose all right some real financials this is this I can sink my teeth into this I'm the expert in find me a YouTuber who knows more about financial statements find me I challenge you I've seen every kind of income statement balance sheet every kind of reconciliation every country every currency scr's done it Canada's got some capitalism you know they're backpedaling for a while there we'll see if they go full Soviet communism I hope not our neighbors to the north man we need them I need all the pretty girls from Montreal all the pretty girls from Toronto they got some businesses there there other income that's CIA bribes I'm kidding little other income don't worry about it it's classified i' I'd be kind of weirded out being a Boeing analyst on Wall Street I'd ask the CFO some stuff and they'd be like why are you asking so many questions like it's my job they be like torture this man follow this man right now sir my stock pick is a man of National Security I'm on a need to know basis for your guidance the assumptions in your guidance so they've been unprofitable three years in a row according to the income statement but we know because you're not a noob you know the income statement is one half of the story the other half is the cash flow statement Gap net income is one thing that's the income statement cash flow statement sort of tells the truth without the accounting but the accounting should sometimes important too you can't take one without the other look at the inventories we usually don't look at companies like this where their inventories are so large they have a year worth a Year's worth of Revenue of inventories in biofarma you don't have that in software you don't even have anything close to that so you don't even have in inventories at all so The problem w inventory inventories the problem with inventories is working capital right inventory costs you money to make you have to buy the raw supplies you have to make the work in progress then you have to make the finished good all of those cost Capital right all of those are your money that you have to spend so there's quite a uh intensity it's sometimes called Capital intensity that comes with that that's kind of why Boeing is like fundamentally business we'll get into that later there's a tradeoff for having a monopoly but take a look at the property plant and Equipment which I've told you guys many times is the one of the most important things it's actually rather small relative to what I would have predicted they only have 10 or 11 billion dollar of capital that's not that much you would have thought a serious Manufacturing Company like this would have massive amounts of factories that's odd to me I wonder if it's made through you know subcontractors or something like that but the margins are so low look at the gross margins 10% it's something's not adding up here because I mean I just don't understand the business model but like you have a 10% gross margin as a manufacturer that's less than I what kind of company has that low margins with that low margins you would think you have this massive cap X you know what it is it's probably all these subcontractors that's what it's got to be tons and tons and tons of subcontractors that are this guy makes the windshields this guy makes the radar this guy makes the seat this guy makes the chassis you know that's that's probably what's going Assets, debt on there all right 137 in assets how much debt all right so the inventory you can kind of assuage that issue by getting these advances so you can kind of make your customer pay for some of that inventory as it's progressing so they're not completely out of their own pocket so to speak they have a huge uh pension liability because the they're such a uh unionized company stockholders Equity negative that's just an embarrassing man Boeing should have a fortress balance sheet not have debt that foreign governments can buy that debt the open market come on man okay Cashflow statement here is the all important cash flow statement and I'm going to do an AB bridged version because we don't have that much time this was supposed to be a quick and dirty analysis but I kind of got lost in the sauce as they say but here's the cash flow and and note the difference right you have I'm going to bold these two so all you noobs out there I know there's a few noobs that are watching most most of you are season Pros because you've been watching me but some of y'all are noobs and I hate noobs net income that is the profit left over after you deduct everything from revenue that is the product you've sold in this place planes and missiles all right sold 62 billion of planes and missiles they had -5 billion they lost money next year 67 billion planes and missiles but all the costs to make them they lost 5 billion okay 78 billion in Revenue all the costs -2 billion so this makes it look like it's an unprofitable business this is called the income statement this is Gap accounting generally accepted accounting principles which means this is how you treat these numbers these numbers just don't come out of nowhere they're numbers that are they have principles behind them there's a second set of books called the cash flow statement it has different principles this basically the income statement is basically an idealized version of accounting principles that are meant to convey a certain set of thoughts the cash flow statement is the same thing but it's a differ conveying a different set of thoughts in this case it's conveying how much cash did we make this year that is not the same thing as net income although they both are pointing to that number one points at it from an accounting perspective one points at it from a pure cash perspective they're both important to look at in this case the cash flow from operations for Boeing was six billion if you look at the cash flow statement but if you ask the same question the same question of the income statement it says -2 B billion so on one hand we have 6 billion profit on the other hand we have -2 billion of net income somebody says acrs yes there are principles in the income statement that will lead to expenses being treated a certain way and revenue being treated a certain way um and those differences can be big as you can see if you just look at the income statement Boeing is losing money they're unprofitable what is does that mean if you look at the cash flow statement they are profitable they made $6 billion last year they'll probably make more than that look at the trajectory -3 last year or two years ago negative3 billion then positive 3 billion then positive six billion okay uh what about capex capex is important capex is excluded from the income statement so we can't look at cash flow from operations without giving some credence to cap X let's give that Credence and we get something called free cash flow free cash flow num is a little smaller because we're excluding the Capital Equipment but we've excluded that and it's still profitable at 4 billion I think you can take these numbers to the bank more than you can take the net income numbers to the bank so assuming that's the case let's look at the cash the business has they have 17 billion in cash let's look at the debt 52 INB debt so the Enterprise Value is 142 billion is this December December yes okay so this is Q4 2023 Q4 2024 obviously hasn't happened yet so we'll get that annual report in like six months the Enterprise Value is 142 billion for that to that would be the cost to buy Boeing and retire its debt you get 4 billion in cash what's that ratio like well 32 times Enterprise Value to free cash flow but is this free cash flow steady state okay is this the number we can rely on it doesn't look like it because it's so volatile this numbers going up and down like a yo-yo and we've only looked at three years that's why we're going to go back and look at a couple more years and we're going to think about the backlog a little bit and we're going to think about us defense spending a little bit and then we're going to go on to another stock because I paid way much way too much spent way too much time on this but when you look at a stock you got to take your time sink your teeth into it you know it's like that wine guy that looked that you know on Twitter this is how you have to look at stocks yes to look very carefully can't just race through it and make your trade like some Maniac that's how you lose money take it from me I used to do a long time ago I used to plan these trades out for months meticulous research burning the midnight oil cleaning lady came in and left second cleaning lady came in and left at midnight the midnight shift security guards there at 2 a.m. looking at me like and then guess what the trade would work trade would work spectacularly I'd make millions then what would happen I'd start feeling myself and I'd say you know what I'm just going to make a trade real quick I like this stock o lost 50 Grand that's no big deal I'm still up make another trade real quick lost 200 Grand on that before you know it all the money's gone you got to keep your discipline all the profits are gone don't don't try to make you know a fortune in 5 minutes if it were that easy every body would do it not saying you can't make money trading you can but you have to be extremely disciplined all right we can go through this one a lot faster because we've already read one of them right well some of the smartest people in the world invested in our company because our revenue is growing very rapidly and we're very talented and experienced managers I've built billion dollar companies before we're actually about to raise 5 to 10 million so okay so look at that the Boeing had its worst year in 2020 really really bad Revenue new really really bad [💎] it's a cheap stock if.. deliveries so they're kind of coming back from that terrible period of time 73 wow they used to move a lot of 737s look at this 490 529 580 and then they dropped to like near Halt and then they went back up so Boeing gets back on track could be a very cheap stock let's take a look but one question is like if they're not delivering planes who who is like can they really get back to selling 500 planes a year clearly the Mark is Satisfied by somebody else that are like there's just no planes yeah I want to look at air buses deliveries obviously like these are long-term delivery schedules right these are not like you order the plane get it next week so we had plane deliveries for Boeing is well below the peak still and I'm I'm guessing they have the quarter lead okay so this does look like it's a net number that goes down oh look at that they they had much higher margins at one Final thoughts point yeah this is a cheap stock I it's going to take a while for it to turn around probably but like this is an obviously cheap stock yeah I don't I don't see why you wouldn't have this in your portfolio to be honest because all they got to do is get their business back to where it was in [Music] 2016 it's just a question of how patient can you be because I don't think Boeing I mean they're on they're on the mend it's going to be a while before they turn around because it's it's that kind of long-term business and it's not the funny thing about the stock market is if if a process like a turnaround is going to take a long time the stock market is a discounting machine as long as that process is certain the market will discount it immediately because the Market's very smart it's a very strange phenomenon but it it is the case sometimes the market has a little myopia and it's not as smart as it looks and that's for us to take advantage of but in general the Market's very very quick about like okay there's going to be turnaround and stock would just double and you'd be like yeah but the turnaround was was supposed to happen over like 10 years Market don't care if it's uncertain there'll be a turnaround or not different story and if you don't know when the turnaround is going to happen it's going to take forever and ever different story but so they had Peak margins gross margins 19% that's crazy all right there's uh free cash flow right here or cash flow from operations look at that at one point oh did I skip over the other years of cash flow 10 billion 13 billion 15 billion capex all right so they had 14 billion Peak free cash flow so that's trading at 10 times prior Peak free cash flow yeah it's an okay stock some people like the safety of a big company that's got like this big brand and Boeing has that and I think that you could probably buy this stock and just forget about it that you even have it for the next like 10 years or five years or something like that and you could probably just do fine if you're like a really active Trader you know I hate giving like buy the stock type advice because like one of the problems is one I mean every investor is wrong a lot like you don't just um there's no investor that only makes money you get lucky you get unlucky you know if I'm right 60% of the time I'm thrilled yesterday was criticizing me over a stock pick I forgot I even made I don't even know for sure if I made it I was just like look man there's nobody on the planet that can give you stock picks that work all the time even on Wall Street even Steve Cohen even the best of the best this is not happening nobody will ever be that good you know so get that out of your head so if you get a stock pick from somebody you got to be pretty cautious about what that means it doesn't mean drop everything and go go do what they say it means you know maybe I'll buy a little bit maybe I'll do some homework maybe something like that it's certainly not you got to be crazy if you just want to go do what they say and this is what the process looks like I mean got to look at hundreds of stocks before you buy one that sound fun to you if it sounds fun to you do when it doesn't sound fun to you and you think that sucks you're in the wrong game being in the stock market it it's like going through a garage sale working in the markets is is like going through a a huge garage sale that never ends a never ending garage sale and you have to be happy at how big the garage sale is ideally you want it as big as possible and you're going through each stock each little trinket each little Trinket in the garage sale and you're looking for the one trinket that they mistakenly left out that's worth a ton of money one of the tricky parts of Boeing is that they never were really operating at the [💎] The tricky thing about Boeing scale they were operating at until they fell from Grace so that kind of makes it trickier to analyze the company because it's really hard to know like if they had decades where they're making that many claims it'd be fine and you just jump into the stock and AP in but they never really were that at that scale ever right so like they grew like in 201 revenue is just 30 36 billion so it wasn't like they were killing it you know oh oh wait a second actually I might have this wrong this is just the airline Revenue take it back okay so they did they did have a period of time what I said is still valid but like they they only have had a a decade 15 years where they were selling that many planes well they used to break out defense more carefully military aircraft Network in space and services there that defense business is very stable 69 billion growing to 100 falling to wow fell a lot to 58 which I don't know it was 10 years ago when they had that much revenue and now slowly going back up sometimes they call it kitchen sinking but in their very best year they generated 14 in cash soow yeah I'd buy this I don't know if I'd get the greatest return in the world but the safety of such a big company kind of compensates for the lower return I also would have to look at Airbus pretty carefully if I wanted to buy the stock because I want to see if they lost share or like the kind of good thing for them is that Co happened around the same time of their their safety problems so like they normally would have lost a ton of sh they ended up kind of but again these contracts play out over such long durations that it's not clear I I think they'll I mean clearly to to play this stock you you just sort of have to have a sense for is this turnaround happening or not and that's something that'll you know it could take many years there are many examples of companies like this that sort of had these big problems Johnson and Johnson had them for many years there was a company called American home products that had one a long time ago that I was me deep in AMX had one very famously that Warren Buffett took advantage of so like there isn't Quality issues can become a great discount opportunity necessarily uh quality issues are sometimes great opportunities quality issues can be solved if they linger long enough it hurts the brand if Boeing has a brand that's are you really not going to take a Boeing airplane no I don't think Boeing this brand is long as low as it can be I I still go on to Boeing airplane stranded Ash not it's not good all right this is kind of interesting like before their Peak 2018 they were doing like six or seven or eight of free cash flow so one has to wonder is that more steady state representative of the kind of cash flow you can expect from Boeing if that's the case let's call it seven that's not cheap so you really got to understand the airline business Commercial airplane business cuz and I don't why in 2018 and 2017 that they have such big earnings it's not too expensive like I'm it's very like it's like very attractive in some ways but like it's not you know jump up and down by this tomorrow kind of thing it's a tough one for me especially since I don't know the space no pun intended okay what other stocks should I look at I'm going to ask my godell my go delians these guys have had great stock picks honestly um they gave me iance and they gave me um Zoom