Quick Pick: BA

You've already seen the news: Yesterday, Boeing (BA - commentary - Cramer's Take) delayed the first 787 test flight by about four months and pushed back its timeline for delivery of the first planes to the end of 2008. With the stock down about 5% since that bit of news, now's a good time to go back through the Boeing story.

First, consider the macro backdrop Boeing is operating in. The commercial aircraft industry is in the midst of an extended up-cycle that is driven, for the first time, by demand from multiple parts of the world -- not just the U.S. and Europe. With Boeing's new 787, I believe that no one is better positioned to benefit from that macro tail wind.

Whether deliveries begin next May or at the end of 2008, the fact remains that Boeing is on the cusp of a game-changing new product cycle, with more than 700 firm orders -- possibly going to 1,000 in short order -- and a record backlog.

Boeing's stock price has historically tended to climb when backlogs are rising, as they are right now. The earnings power of this backlog, though, should be worth even more. In the past, margins peaked at around 10%; this time around, margins could expand to 15% or more by 2010.

So what's with the delay? Boeing naysayers remember all too well the snafus of competitor Airbus with its wide-body program, which eventually snowballed into a two-year setback. But make no mistake: this is no Airbus. Boeing's delay is due to bottlenecks in the supply chain stemming from parts shortages, not structural problems. Indeed, on yesterday's conference call, CEO Jim McNerney was clear in emphasizing management's confidence in the design of the 787 and the "fundamental innovation and technologies that underpin it."

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At time of publication, Norton's fund was long Boeing and Boeing calls, though positions may change at any time.

Charles L. Norton, CFA is a principal of GNI Capital, an equity long/short money management firm that provides investment management services to institutional clients including mutual fund sponsors, trust companies, investment advisory firms, corporate retirement plans and family offices. Mr. Norton is responsible for portfolio management and investment research for all of the company's managed assets, including the Vice Fund (VICEX) and the Generation Wave Growth Fund (GWGFX). Previously, Mr. Norton had been a vice president in the equity research department of a New York-based hedge fund, where he also managed separate long/short equity accounts. Prior to his experience on the buy side, he was an investment banking analyst at Smith Barney. He has a bachelor of science in management degree in finance from Tulane University's A.B. Freeman School of Business, and is a CFA charterholder. He is a member of the CFA Institute and the CFA Society of Dallas-Fort Worth. While Mr. Norton cannot provide investment advice or recommendations, he appreciates your feedback; click here to send him an email.