Stock investors: Focus on history not headlines – UPDATE

Many investors were using the slowdown in the Chinese economy to justify the sale of stocks which has led to the decline in prices early 2016.  If this weakening Chinese condition was a long-term factor, you would anticipate that the slowdown in Asia would impact the aviation market.

China Airlines Cargo Boeing 747-400F B-18709 (1)

Boeing 747-400 Cargo Plane

We discussed at the time the need to focus on the long-term prospects of the aviation firms.  Aircraft makers such as Boeing Company, Airbus group SE and Embraer SA stated that they were not concerned with the 2016 Asian economic slowdown.  In fact, the actual problem facing these companies was keeping up with the demand.

Boeing predicted at the time that the Asia – Pacific region would take delivery of over 14,000 planes over the next 20 years which will result in 38% of its projected global total.  Airbus predicts that over the next 20 years this region will take delivery of nearly 13,000 new aircraft with a value of USD $2 trillion (yes – trillion with a T).

The chief operating officer of Airbus recently stated that his biggest worry was not being able to build all of the planes that have already been ordered.  This is the focus that investors needed to have on the Asia-Pacific region and not the temporary economic slowdown.

Update:  Now a little over 16 months later, the markets have rewarded those investors that understood the long-term prospects of The Boeing Company (stock ticker: BA) and stayed invested in the company.  In March 2015, the Boeing stock price was $130.  At the end of July 2017, the price was $243 – an increase of 86% in under a year and a half.

Another sector that we discussed during the March 2016 post was the struggling agricultural equipment industry. Deere and Company (ticker: DE) is one of the leading companies in this industry and in 2015, 75% of its revenues came from the agricultural and turf division. The farm machinery industry in 2015 suffered its worst sales year since 2009.

At the time, we asked:

So who would possibly be buying shares in the Deere company with this outlook?

Why no other than one of the best investors over the last several decades – Warren Buffett.   His holding firm Berkshire Hathaway Inc. disclosed in February that they had raised their position in the company.  Mr. Buffett often preaches being greedy when others are fearful, something he’s clearly doing with the purchase of his shares in Deere and Company.  So what does he see that others don’t ?  It’s all about understanding history and not headlines.

Update:  Deere stock price in March 2016 was $80 and at the end of July 2017, the stock had increased to $128 – an increase of 60% in 16 months.  I hope these two examples of 2 sectors that were temporary in downturns will help provide perspective for investors and have them focus on the long-term opportunities that exist for most of the large publicly traded companies.

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About Dan Crimmins

Dan Crimmins, co-founder of Crimmins Wealth Management, is a financial coach and fee only financial planner. Have a financial question? ASK DAN

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