How Should Investors Approach a Company Like Boeing?

There's a lot of demand for new airplanes over the next decade -- airlines have already been placing huge orders to feed it. That'll obviously help Boeing (NYSE: BA  ) , but what other companies might benefit from this multiyear trend? Blake Bos discusses the situation with senior analyst of Stock Advisor, Jim Mueller.

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Blake Bos: Blake Bos here, folks. Today we're going to be talking aviation. I'm here with Jim Mueller. He's a senior analyst on our Motley Fool Stock Advisor newsletter. We're going to be talking Boeing, Airbus, all the big players, some of the small players.

I'm looking at this chart right here, that Boeing has, and it's $4.8 trillion of demand for new airplanes, going into 2032. That's a huge number. I can't even wrap my head around that much money. As an investor I'm like, "I want a piece of that action."

Jim Mueller: Definitely.

Bos: Obviously. $4.8 trillion is more than the GDPs of large countries. When I'm looking at this sector, though, how do I go about looking at it? When I look at a big company like Boeing, it's got so many moving parts. Is that the best way to approach it? Do I go with suppliers? How would you look at this industry?

Mueller: That's certainly an intriguing number, and hopefully it'll generate a lot of revenue for Boeing and Airbus EADS. That's one way to get into it, but note these guys are not pure plays. They're both big on the defense side as well, so it's not just commercial aviation.

But you can also get into the parts makers. Precision Castparts (NYSE: PCP  ) supplies a lot of fasteners and a lot of the titanium that's going into these. You could even get into General Electric (NYSE: GE  ) .

Bos: That's the engines.

Mueller: They make the engines, exactly. Or you could get into some of the aftermarket players like Heico (NYSE: HEI  ) or TransDigm (NYSE: TDG  ) , who make a lot of the maintenance parts that need to be replaced over and over and over again during an aircraft's 20-30 year lifetime.

Bos: A lot of investors don't think about it. These aircraft do stay in the air a very long time, so you can play it with the parts suppliers, which maybe... do they make higher margins, do you know?

Mueller: That I don't know, off the top of my head.

Bos: I don't expect you to memorize all the little details!

All right, Jim. That's a great way to look at the sector. Investors, always remember you can go with any other manufacturers, not just the airplanes. You can go with the parts suppliers, all the downstream users of these parts.

That's all I have for you today, folks. Thanks for watching, and Fool on!


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