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Getty Images Southwest Airlines Boeing 737 MAX aircraft are parked at Southern California Logistics Airport on March 27, 2019 as the airline waits out a global grounding of MAX 8 and MAX 9 aircraft.
The bottom may be in for Boeing Co. BA, -0.40% , and if so, it means one aerospace ETF could take off.
Shares of the beleaguered aviation company make up 20% of the iShares U.S. Aerospace & Defense ETF ITA, -0.30%, pointed out Tom Essaye, president of The Sevens Report, in a research note out Tuesday. The exchange-traded fund has gained 31% in the year to date, even though Boeing shares are up less than 5%.
And Essaye thinks there’s room for Boeing to gain altitude. “I’m not a Boeing analyst,” he cautions, but lays out a strong case for upside. The decision to halt production on the 737 may have been negative for the stock in the short term, but will likely helpful in the longer term. And the stock will likely get a tailwind from the decision to replace CEO Dennis Muilenburg.
“Now, Boeing enters 2020 with 1) virtually no expectations about when the 737 will come back online (increasing the possibility for an upside surprise), and 2) new leadership,” Essaye wrote.
Shares of the ETF popped more than 1% on Monday after the CEO handover was announced, as noted by MarketWatch’s Mark DeCambre.
But even if Boeing doesn’t rebound further, Essaye still makes a bull case for the iShares ETF. Most of what he calls the “credible” presidential candidates want to increase defense spending, which would benefit ITA. And belligerent posturing from North Korea could also benefit defense stocks.
Related: Here’s an ETF that proves there is intelligent life in the universe after all
