Investing Club: How we view our Boeing position after the tragic plane crash in China

Published Mon, Mar 21 20223:40 PM EDTUpdated Mon, Mar 21 20224:18 PM EDT

Shares of Boeing (BA) were under pressure Monday — falling as much as 6.5% — after the crash of one of the aircraft maker's commercial jets in China. This is a classic case of panicky investors trading on headline risk. While it may be tempting to trade on tragic news, we believe the best strategy to is to stick to your investment thesis. As a result, the Club isn't following these investors out of Boeing. First, it's important to acknowledge the horrible news. A Boeing 737-800 next generation plane operated by China Eastern Airlines with 132 people on board plunged mid-flight and crashed into a mountainous area of southern China. A rescue operation is under way, but there have been no reports of survivors. More than anything, our thoughts are with the victims and their families. As investors, however, we must also look at the risk these events might pose to the stocks in our portfolio. For starters: It's worth noting the Boeing jet that crashed in China on Monday was a 737 NG — the model before the 737 Max, which was grounded worldwide in March 2019 following two deadly crashes just five months apart. After months and months of investigations and then regulator-mandated changes , the Max jets resumed flights in the U.S. in December 2020. Boeing shares have had a tough few years as the company has been working to restore its reputation and to rebuild after the Covid pandemic-related slowdown in airline travel leveled the stock in March 2020. Against that backdrop, we want to stress that a lot remains unknown about Monday's crash. What we do know Here are the key facts so far (as of this writing): On Monday, China's civil aviation authority said a China Eastern Airlines flight crashed in the mountainous Guangxi region. The plane, which was a Boeing 737-800 NG, carried 123 passengers and nine crew members. Data suggests the plane went down quickly, plunging over 25,000 feet over roughly two minutes. The Boeing 737-800 NG does not have the Maneuvering Characteristics Augmentation System (MCAS) software issues that played a crucial role in the 737 Max crashes. The Boeing 737-800 is a very common aircraft around the world, especially in China. According to The Associated Press, Boeing delivered the plane involved in Monday's crash in June 2015, and it had been in use for over six years. All 737-800s in China Eastern's fleet are being grounded, according to the AP. Boeing has acknowledged the reports of the crash. The company indicated it was working to gather more information. More information on the crash will surely surface in the coming hours and days. But the actual cause of the crash is not yet known. Getting to the bottom of what happened is likely to take time. What it means for BA stock This has been a frustrating stock to own. Jim Cramer has before lamented "the endless stream of bad news" involving Boeing . The company seemingly takes a step forward, then two steps back. Then three steps forward and another step back. Even so, we've stuck by the stock, seeing brighter days ahead. One of those days was supposed to be the 737 Max returning to service in China, the first country to ground the model just over three years ago. Back in December, China's regulator issued an important safety directive for the 737 Max , telling airlines to make changes necessary for the plane to fly again. That was a good sign. Then last week, Reuters reported that a 737 Max jet was headed for the company's completion plant in China . We also saw this report as positive news. This brings us to a key question in light of Monday's crash: How does it affect China's plan to start flying the 737 Max again? These are two different models of aircraft, with the 737-800 being an older model. But Boeing is the manufacturer in both, and it's just hard to say whether this crash will change Beijing's stance on the 737 Max. Bottom line Other tailwinds for Boeing include the return of international travel from its Covid-driven declines, as well as the broader need for airlines to upgrade to more fuel-efficient jets. But the 737 Max returning to Chinese skies was the most nearest-term upside catalyst. Now, we're more uncertain about whether it will still happen soon, which helps explain our decision to sit tight on our Boeing holding for now. Management must be up to the task of executing through this latest challenge. Last month, well before the crash, we were worried about the company's ability to execute and trimmed our position . At the time, we described the trim as a way to right-size the position and hedge against an execution misstep or an event-driven situation that would send shares back below $200. The Trust has owned Boeing since Oct. 5, 2020. Our position now stands at 525 shares, with an average cost basis of $180.66. Boeing shares were trading around $185 each late in the session Monday. (Jim Cramer's Charitable Trust is long BA. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

The Boeing logo and name are seen on a building at Boeing's new facilities April 27, 2012, in North Charlston, South Carolina.

PAUL J. RICHARDS | AFP | Getty Images

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