The Ghosts of Lockheed and Boeing Visit Gilead Shareholders

Five years ago, Boeing and Lockheed Martin stock got unusually cheap in response to a threat of sequester in which many market participants interpreted congressional posturing about reducing the budget deficit into deep cuts for the defense industry. This threat of regulation sent Boeing stock down from the $80s to the $50s and also sent Lockheed Martin down from the $80s to the $60s.

At the time, the P/E valuation for both stocks travelled to well below historical twenty-year averages. Boeing was trading at $56 while earning $4.82 per share in profits for a P/E ratio of 11.61. The threat of budget cuts never materialized, and Boeing went on to deliver 11-12% annual earnings growth through 2015 as estimated earnings grew to $8.30. The stock now trades at $117, for a P/E ratio of 14.

One of the most frustrating oft-repeated statements I encounter on message boards come from investors … Read the rest of this article!