Ok so now, this will be my week-end long post and... let's be clear on every point!... instead of bashing the stock just because the market is trying to pull it down and some sharks are around (By the way, I am just a Canadian individual, with no link neither with any financial firm nor with any business related to Bombardier; no link neither with the family nor with employees; I have just few BBD stocks for long time and bought few more recently. So it is not a professional opinion, but just from a private individual who made some inquiries and followed the story of the company for some time and like to share some points of view about it, which I think are very important especially for Canadian people: see number 3 below)
First: is it a risky investment? Yes it is (but anyway single stocks are always risky investments) because there are some levels of uncertainties and markets do not like that, and it became a "penny" stock. Also some big players have interests in pulling the stock down, which attract short sellers to bet on the down trend (but they can lose a lot in this game!). Is it speculative? Depends on what it refers. Referring to the above, yes “some” make it speculative. But real speculative stocks are for example technological start-ups or gold exploration: they have no history, no sales, just ideas, concepts, prototypes or studies. For BBD, it's clearly not the case and there is a strong base showing that the stock is undervalued. The other risk is the whole stock market these days which is very volatile and if it drops, BBD may follow the trend.
Second: What to do? Depends who you are. If you have not much money and cannot risk to lose it; better not to touch it yet. Maybe wait things to be clearer. If you already have the stock for long time and lost a lot in value: that's the most difficult decision to take. A lot of fear is spread to push people to sell their stocks at low prices... but the ones who sold them at 1.20$ when many thought it was the bottom took also a good decision for themselves and they can buy it now cheaper (on a purely financial point of view). Can it go further down? Yes maybe. But it seems there is a level of resistance around 0.78$. If you sell, don't think of it anymore. If you keep it, be aware you are in trouble ground. If you sell half, you must know that you will always have done half a good decision, half a bad decision!
Now if you have spare money and, at worst, are ready to lose it if things do not turn well, and if you are Canadian (mainly for the 3rd point below), what could be the good reasons to invest or hold your shares (I am not speaking of gambling):
1. Just in financial terms, it can be rewarding knowing that it is now undervalued compared to the assets and business potential of the company. Most Securities have target price between 1.35 to 1.75 (TD has it at 0.95 et RBC Capital at 2.00). But it can even rocket higher with good news and Federal backing. Especially considering that there are 20 Millions shares which have been "short sold", meaning that it is a selling bubble (they sold shares they have not) which will have to be covered by the same amount of buying before the end of a delay. So if the trend tends to change to go bullish, they will rush to cover not to lose much, which will create a pressure on the price that could rocket it up. (that's also a reason to bash on the stock… so people sell, not buy!)
2. Because you bet on longer term on the business itself. Bombardier is very successful and leader in the rail business and the market potential in the world is big (with the focus of the news on the CSeries, people may undervalue the potential of the Transport Division). Regarding the planes, there is a downturn now for all companies just when Bombardier launch his first models of commercial airliners (CSeries) so it is more difficult but they are in a niche market (100 to 150 passengers) and a step-ahead technologically speaking (the "greenest" and most economical: respect already all future FAA restrictions in gas emission which the others don't, consume 20% less fuel and is the quietest plane). They have enough cash-flow now to complete the program and are not in a so bad financial situation. They need a strong backing from the country to unlock confidence from the airlines, stating that the CSeries are here to last (see my other posts for details on that: links below)
3. Now as Canadian, it is one of the last icons that makes the pride of the country and its fame around the world. They spread the image of the red maple leaf in many countries but more than that they are at the top of an aerospace sector that exports 25 Billions$ a year and is responsible for 200.000 jobs (see more details in other posts below). Do we want to become only subcontractors to the Americans as a country or do we want to support the quality of our innovations that make our fame and our own independent wealth. Europeans governments support Airbus, American Defense supports Boeing, will we back our leader which already complete a fantastic plane (probably with a cheaper budget than if it would have been developed by Airbus or Boeing which have much heavier structures). It's time to know what we want. Will we remain like faint-hearted bankers who only support what is already 100% sure. It is like sailing on a majestic ship and stand with pride at the front but shaking like a leaf at the first storm and jumping in the lifeboat at the first sight of pirates. Yes it is a stormy market right now, yes there are sharks and pirates around... so will we jump in the lifeboat?
Regarding the permanent critics on the family and the administrators, I am sure they are not perfect (who can say he is?), I am sure they made mistakes (who never made some?)... and I am quite sure they are people around who have strong interests to bash on them and spread this in the press. Think about, due to the structure of shares it is not possible to do a hostile takeover of the company. So what better than spreading any kinds of information contributing to prove that there is a bad management of the company and the reason is the controlling family. But anybody who knows a little about the aerospace sector knows that it has been the same for all the other companies when developing their first commercial airliner: the high complexity generates additional delays and higher budget. Airbus had to be heavily subsided in its beginning. And they did because they knew the very high valued economical development that will stem from that.
I am sure that the Bombardiers are not happy to know that all the shareholders lost a great value in their own patrimony (and by the way they lost a lot too themselves) cause, until the end of 2014, they always paid great dividends to the shareholders (that's why you cannot analyze the profitability of the stock just with the curve of the stock price as some are trying to make believe). But it is rare in a business not to have to go through difficult steps, even if you drive on the safest roads 'cause in such case, competitors will take bumpy shortcuts and you'll end losing your market. Embraer is behind Bombardier in the development of commercial aircraft but if Bombardier had not the CSeries program, they would be behind them and they would have slowly lost on the business jet market too. They had no choice to be innovative and grow. With all the defects and mistakes that ones can load on their back, it is having short memory not to remember that it is also this hardworking family who has contributed since the beginning to develop this business and bring it to what it is now, contributing in Billions$ to the wealth of the country and in hundreds of thousands to so many jobs in the aerospace sector. They should be rewarded for that.
So, coming back to the fact that they lock the capital with this dual-share system. Ok it is a way for them to keep the control but... If it has not been like that, the company would have long been torn in pieces after hostile takeovers and resold in parts, maybe relocate in Mexico or elsewhere. This family always fought to keep jobs in Quebec and Canada. There would not have been CSeries program for sure because financial oriented people are weaker than industrialists, they cannot plan over 3 years, and they want the quickest cash. For sure there is pressure on them now. First to pull the price at the lowest to put them in difficult position, be obliged to break the dual-class structure and become open to possible takeover. If it happens, the new shareholders may not have the same ethical view in term of keeping the thing as much Canadian as possible. You can say: there are many foreign companies in Canada and they create jobs and it is working well. First, most of them, like the car industry for example are here to get access to the local market (Canada and US)… they want to sell cars here. Also, if they need to close a plant in Canada, they will just do it. But in case of Bombardier, 90% of the sales are exports. So no need to be in Canada. They can take the know-how and do it anywhere. For sure it is not done immediately… but after several restructurings, optimization of costs structure, concentration of engineering services, qualifications of suppliers, you would see that the aerospace sector in Canada would be melting. The only reason to keep things in Canada is when the controlling head is Canadian and want to keep the head, body and arms in Canada! So as a Canadian shareholder, what do YOU want for you and for the country. Anyway in case it becomes unavoidable to weaken the position of the current controlling shareholders, the Federal government should take a stake in the company with veto power to protect it from hostile control. It must be considered as heavily strategic. More than 30 Billions$ of GDP and hundreds of thousands of jobs depend on that. Competitors are waiting like sharks and, forget the great aerospace sector in Canada if they take it. Look, the French government has a 25% stake in Airbus: they want to keep it European. In this game, the government must show it backs the company or the airlines clients will not be confident enough on the durability. And the French president itself travel abroad and sign the big orders (that's a little message to some ministers who do not feel it's necessary to go somewhere!). So Trudeau must back the project to unlock confidence (and buy a CS100 for his official travels!) and take all the guarantee that the head remain Canadian, and more than that, “Canadian-oriented” like the Bombardiers!
Ok that's all! hope I pluck the patriotic string and that it resonates well. If you agree share this with friends in Canada to create a movement and reverse the trend! (why not… “hope” does not harm!). And help to re-post it so it stays in the first pages of this bullboard
Read more details in these other posts: