Friday, January 24, 2014

Why I Bought Airbus

My apologies to my readers. I promised article yesterday, but writing it now, about 10 AM Central time.
So why Airbus (OTCPK:EADSY)? Well, try to find another industrial company which has orders for 8 years ahead. I know another one, Boeing (BA), but Boeing is in US, and one of my investment theses is that Europe just started recovering. So if there is a choice between similar US and Euro companies, I choose Europe.
When I'm looking at Airbus (and at Boeing for that matter), I ignore all noise about new exciting products (A350, Dreamliner etc.). What matters is core business. Core business of Airbus is A320 family. Company has backlog for 8 years at least. Producing 42 aircraft a month is not enough, so company is going to increase output.
As usual, I can't ignore dangers. First of all, it's competition from Boeing 737. But demand is so great, there is a place for both companies (BA also has about 8 years backlog). Second danger is from Bombardier (BORAF) and Embraer (ERJ), both of which are developing their own 120 seat aircraft. This danger is not significant so far. Reasons: planes are not ready yet, they only compete in part of A320 segment, A320 has a very good history with airlines.
Disclosure: I am long EADSY, .
Additional disclosure: I have no positions in other stocks mentioned. Positions can change any time.

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