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ETFs to Win on Boeing Shares Gain: Prospects Look Bright

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Shares of Boeing Company (BA - Free Report) gained about 6% on Dec 3as the low-cost Irish airline Ryanairordered 75 extra Boeing 737 Max jets with a value of $9 billion. The news acted as a fresh lifeline to the struggling U.S. planemaker after regulators lifted a 20-month safety ban recently.

On Nov 18, Boeing won approval from the U.S. Federal Aviation Administration (FAA) to start re-operation of its 737 MAX jet after two fatal crashes (in Indonesia and Ethiopia) that caused two years of regulatory scrutiny and corporate chaos.

The FAA elaborated software upgrades and training changes Boeing must put into effect for the jet to recommence commercial flights after a 20-month grounding, the longest in commercial aviation history, per Economic Times. The Economic Times article indicated that the single-aisle jets like the MAX and rival Airbus A320neo are pillars of the global fleet and huge contributors to the global industry profit.

Ryanairis one of Boeing’s most important buyers. Boeing already has an order of 135 of the 197-seat Max 200 from Ryanair. Ryanair’s first jet on order will likely be delivered early next year and the final one by the end of 2024.

No wonder, the news offered Boeing substantial gains. The airline added about 0.7% after hours on Dec 3. “This is the beginning of the fulfillment of a more robust order book,” Boeing Chief Executive David Calhoun said at a signing event in Washington DC, as quoted on CNBC.

To add to this, American Airlines (AAL - Free Report) is also “flying its employees, including top executives, and reporters on its Boeing 737 Max planes this week” in order to boost confidence among the passengers. “Boeing is also negotiating with airlines including Southwest and Delta and Alaska Airlines, which last month agreed to lease 13 Boeing Max jets, industry sources have said,” as quoted on CNBC.

 Against this backdrop, though we believe that the Boeing stock does not offer an aggressive buying opportunity even after the FAA approval and Ryanair’s order, the hopes of improvement in Boeing business can be played via basket approach. The basket approach or the ETF route minimizes the stock-specific risks. Below we highlight a few such ETF options.

Boeing-Heavy ETFs in Focus

iShares U.S. Aerospace & Defense ETF (ITA - Free Report) – Boeing has about 9.84% weight; up 1.67% on Dec 3

Invesco Aerospace & Defense ETF (PPA - Free Report) – Boeing has about 8.86% weight; up 1.29% on Dec 3

SPDR Dow Jones Industrial Average ETF (DIA - Free Report) – Boeing has about 4.44% weight; up 0.29% on Dec 3

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