Boeing is the top performing DOW stock for 2017. It gained 89.5% in 2017. I first invested in Boeing in Jan of 2014 @ $129.5 per share and kept on adding to my position till mid of 2016. In 2016 my purchase price was $128.5. Things that I learned from this experience:
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- Patience – I cannot overemphasize the importance of being patient when it comes to investing. It takes time for a business to grow and sometimes it takes time for the market to recognize this growth. Life is not bathing us with unlimited opportunities, when you see one pounce on it and stick with it. For over two years I didn’t see any increase in my investment but I didn’t lose patience because my analysis was telling me the stock was cheap.
- Don’t measure your portfolio performance in one year increments – I think many people will disagree with me on this one but I look at my portfolio performance in 3-5 years increments. I will use my investment in Boeing to highlight this point. Let’s compare Boeing yearly & cumulative performance to S&P 500 from 2014-2017. Over the last 4 years S&P 500 outperformed Boeing twice. If I was comparing yearly returns then I would have sold Boeing at the end of 2014 but instead I kept buying.
Year S&P 500 Return $1K invested in S&P Boeing Return $1K invested in Boeing Boeing Vs. S&P 500 2014 13.69%
$1,136.90
-4.77%
$952.30
Underperformed
2015 1.38%
$1,013.80
11.27%
$1,112.70
Outperformed
2016 11.96%
$1,119.60
7.67%
$1,076.70
Underperformed2017 20.49% $1,204.90 89.50% $1,895.00 Outperformed
Total Return 55.48% $1,554.85 116.20% $2,162.00 Outperformed
- Believe in yourself – Over the past 2-3 years I have spent a lot of time on trying to learn how to value a company. I used the Break-Even Analysis (which I have explained in another post) to value Boeing. There was no one telling me whether I was right or wrong. I had to believe in what I had learned and act on it. It was scary but I trusted my analysis. Through my analysis I learned that Boeing was generating a huge amount of Free Cash Flow and had an order back-log of 6 years which provided safety to the future cash flow. I draw a lot of confidence when I now here Analysts talk about these two factors as the reason for the run in Boeing stock price. It provides validity to my analysis.
As I start my quest to find another business to invest in, I am reminded of what Howard Marks wrote in his book ““The Most Important Thing”. He wrote “Even the best investors don’t get it right every time. The reasons are simple. No rule always work. The environment isn’t controllable, and circumstances rarely repeat exactly. Psychology plays a major role in markets, and because it’s highly variable, cause-and-effect relationships aren’t reliable. An investment approach may work for a while but eventually the actions it calls for will change the environment, meaning a new approach is needed. And if others emulate an approach, that will blunt its effectiveness”.
These words from Howard remind us of the challenges that the game poses. I am confident if I work hard (read, read, read….), remain patient, measure my performance appropriately and believe in myself, I will be able to find my diamond. As you play the game of investing, you are welcome to try this approach. If you enjoyed reading this post please like it, share it and sign up to receive regular updates. Happy Investing!
Disclaimer: These are my personal views and are for educational purposes only. I am not a financial advisor.I am not recommending any of the companies mentioned in this post.
