With all the craziness, I figured I'd type up a quick memo about why I've recently started to invest in Boeing, as I see significant upside, to offer some stability in these crazy times.

As I'm sure everyone on here knows, the stock was hammered by COVID-19, and hasn't yet recovered, still down almost 50% from its 52 week high. This is likely because of fears associated with the 737 Max, specifically, how safety concerns will affect future orders. While these concerns are valid, I believe they're overblown and represent the potential for significant upside in the future. Before I get into the details, I haven't had the time to really hammer out a full valuation, but I do think that the Company can reach pre-pandemic levels for the reasons I'll outside, representing around 100% upside from where it currently is.

First, Boeing is a diversified company with about 40% coming from its commercial airplane business and about 35% from the defense business. Normally, especially on the defense side, I don't think it's great to be so dependent on one customer, in this case, the U.S. military, but the planes that Boeing creates can't be easily replicated by defense competitors. For example, Boeing makes probably the most successful combat plane in history, the F-18. If the government decided that they wanted to start ordering F-18s from competitors, those competitors would have to redesign the whole plane as Boeing likely wouldn't just hand over the blueprints. You also have engineers who would never have worked on the plane before which could create safety issues and certainly some delays. For something as expensive and complex as a plane, this provides an incentive for the government to keep ordering planes from the company that won the original contract. In this case, the concentration of orders from one customer really limits the risk associated with the passenger segment.

However, the real upside is associated with the passenger segment. Unlike most travel stocks, Boeing hasn't recovered, because of issues in that area. I think that these issues are overblown and present a great opportunity to add upside and diversification.

Boeing really does benefit from only having one major competitor in the passenger aircraft space, Airbus. Each plane that these manufacturers create is designed to fill a specific niche, with not a lot of overlap. i.e. The 777 and 787 both are long-range, international jets, but serve different purposes and are bought by airlines for different uses.

This means that the 737 Max really only has one competitor, the Airbus A320 Neo, however, Airbus is currently sold out until 2025, giving airlines no choice but to purchase a 737 Max if they need to buy a plane that fits that particular use case.

There are also high switching costs associated with Airbus jets. With the exception of Delta, US airlines are committed to the 737 Max with hundreds of jets ordered per airline. This is important because crews have to be certified for the family of jets that they are flying, so if a pilot is currently flying from New York to Chicago on an A320 Neo, they can't necessarily fly the same route on a 737 Max without the proper certifications. This creates massive expenses for airlines in the form of switching costs that would occur if Airlines began to switch from a Boeing fleet to an Airbus fleet, creating an incentive for airlines to stick with Boeing through the storm.

There's also the matter of pricing in general. Generally speaking, after discounts, the 737 Max and A320 Neo family of jets are pretty competitively priced, but (unless this has changed), A320 Neo jets are subject to a 15% tariff as they are manufactured overseas. This tariff makes the A320 Neo millions of dollars more expensive than a 737 Max. For airlines, many of whom are still financially struggling amid a slow rebound in travel, the cost of purchasing A320 Neos just isn't worth it.

In short, Boeing has a very substantial moat. They make a product that is almost as essential as a product can be without actually being "essential" and switching costs are so high for their customers that they have limited risk in instances like COVID-19 and the 737 Max issues. Unlike most companies, the share price has yet to completely rebound. While I don't think this can happen immediately, I'm buying and holding as a long-term play over the next few years to see how Boeing is able to grow.