Stock Market

The Boeing (NYSE:BA) 737 MAX, an upgrade to the 737 with larger engines, first took to the skies in January 2016, setting the stage for a new chapter in aviation. As the saying goes, it can take years to build a strong reputation, but in the case of Boeing, a few short weeks to destroy it, with a series of nasty headlines around safety, corporate culture, and management turmoil this year. It harkens back to 2018 and 2019, when the crashes of two 737 Max 8 jets that killed 346 people could be squarely placed on Boeing’s incompetence.

And that may exactly be why Boeing’s stock could be a buy here.

Let’s take a step back for a moment. How did Boeing get to the point where passengers are actively trying to avoid flights that use their planes? It does seem clear that much of what got the company in trouble comes ultimately from the top.

Corporate culture and management competence cannot be ignored, and over time can have disastrous effects on not just a company’s viability, but also its stakeholders. An increasingly mercenary corporate culture focused on improving profit margins and shareholder value for years resulted in poor vendor relationships, a focus on cost-cutting as opposed to best-in-class engineers, and inefficient production. Recent incidents, including a door plug falling off mid-flight, underscore ongoing quality control challenges. This comes from the top.

CEO Change Creates Catalyst for BA Stock

This brings us to today. CEO Dave Calhoun is stepping down, and it appears as though several executives may be forced to exit. Larry Kellner, who chairs the board of directors, is also leaving. I view this as important and not just optics. Boeing needs leadership that can set the corporate culture right where the focus isn’t on relentless margin improvement, but rather relentless quality control. You need new management at the top to reset relationships with your own employees and your suppliers.

Boeing isn’t going away. This is a systemically large and important company to the United States. And the stock has been an abysmal performer since late 2020. Changes at the top may be exactly what the stock needs to turnaround.

The Bottom Line

Historically, the best investments come when it seems most bleak for a company. I recognize this will take time, but if you’re a long-term investor, you have that. It’s clear that Boeing has a lot of work to do to instill confidence in passengers. And yes, maybe headlines do get worse. But change is afoot now. There’s a catalyst which could bring with it momentum in stock price movement.

Investing in companies during their lowest points can often lead to significant returns. The principle holds especially true for Boeing, given its historical prominence and the essential role it plays in global aviation. The negativity surrounding the latest 737 Max controversy has undeniably impacted Boeing’s stock. However, it’s precisely these moments of intense scrutiny and pessimism that can signal a buying opportunity for the contrarian investor.

I think Boeing is a stock to watch closely here. There will still be some turbulence at the top as these dynamics don’t get fixed overnight. But this could be a special situation that has a good risk-reward balance as changes take place, pressure mounts, and money shies away from the stock, just as distress becomes the very reason to buy.

On the date of publication, Michael Gayed did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

The Lead-Lag Report is provided by Lead-Lag Publishing, LLC. All opinions and views mentioned in this report constitute our judgments as of the date of writing and are subject to change at any time. Information within this material is not intended to be used as a primary basis for investment decisions and should also not be construed as advice meeting the particular investment needs of any individual investor. Trading signals produced by the Lead-Lag Report are independent of other services provided by Lead-Lag Publishing, LLC or its affiliates, and positioning of accounts under their management may differ. Please remember that investing involves risk, including loss of principal, and past performance may not be indicative of future results. Lead-Lag Publishing, LLC, its members, officers, directors and employees expressly disclaim all liability in respect to actions taken based on any or all of the information on this writing.

Michael A. Gayed is the Publisher of The Lead-Lag Report, and Portfolio Manager at Tidal Financial Group, an investment management company specializing in ETF-focused research, investment strategies and services designed for financial advisors, RIAs, family offices and investment managers.

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