RE:Noticeable change in quality and tone ... Thanks glasshalfful. I've been on this board a while and post occasionally. I'm busy during the day so I research and post in the evenings. My only motivations are to make money on this over the next 5 years. It's my largest holding so I do my due diligence. I also owned Bombardier in the 90s when it was on a tear, but they lost their way when they didn't respond appropriately to the threat posed by Embraer, and then Pierre took charge and he wasn't the steward of capital that Laurent was. Laurent was truly exceptional. I watched the company for over a decade and bought back in for about 6 months after Laurent took over after Tellier, if I recall correctly. I made a good profit and sold when the price got too high.
I kept following Bombardier after the announcement of the CSeries and figured this was the bet-the-company move I was looking for, but that it would hurt until it was launched, so I didn't buy. I knew the CSeries was going to be a make or break and so when the share price started dropping to around $2 early last year, I started buying. My timing wasn't great - I never thought it would stay below $2 - but I knew Quebec and the Federal Government wouldn't let them fail. I also didn't examine the financial statements as closely as I should have because I didn't think they'd burn through cash as quickly as they did once they hit testing, and I didn't realize how much they invested in the Learjet development (what were they thinking?!).
But since Bellemare joined and started hiring a team that were the best at what they do, Bombardier has been quickly turning the corner. He has impressed the hell out of me, so I've been building up my holdings over the course of the year starting at around 90 cents.
Bombardier's rail side holds its own and the Caisse was astute in their investment, they knew Bombardier's labour side was bloated and the 8% margin is achievable, and worst case Bombardier would be broken up into Rail and Aerospace and they would profit on the spin-off. The reality is Bellemare and team have turned it around far faster than anyone (myself included) would have suspected and it looks like Rail and Aerospace will stay together and provide more diversification.
I believe that Bombardier will make $1 billion + in 2020 and am along for the ride because the share price will trade between $6-10 on those fundamentals. I also believe Bombardier made a strategic decision that was brilliant - 5 seats across. I can't see Embraer, Boeing or Airbus building a 5-abreast aircraft to compete with the CSeries. Airbus and Being are all in on a 6 seat wide aircraft, and when they eventually replace their models they'll do so with a 6 seat wide aircraft which gives them 150-220 seats (the sweet spot of the market). Embraer is all-in on their 4 seat wide eJet and they're not going to simply abandon it and build a 5-across model. The eJet won't even be produced until 2018.
This gives Bombardier an amazing opportunity with a CS500 model that, because of it's lower weight and width, will have the best economics bar-none, and will hit the spot of the market with the highest worldwide demand. And that's where I see some very interesting upside potential above my 2020 estimated earnings. Even if Boeing and Airbus compete aggressively on price, the CSeries needs less than a 5% share to be profitable and A&B would be cutting off their nose to spite their face.
Bombardier might surprise me and revamp the Q400 first, to compete against Embraer and ATR with better economics, which isn't a crazy move. I just think that if they want to hit the big-time, they should take advantage of the CS100 and CS300 envelope they already created and stretch it by a few meters.
On the downside, I think the RJ is basically dead, as is Learjet without a new model but Bombardier should move beyond them and focus on the more lucrative parts of the market.
Regardless of what they do next, Bombardier leadership has proven they can turn the corner and anyone who holds on for a couple years will be richly rewarded.
glasshalfful wrote: @ starsearcher & jamesb14
Very impressed with the quality and tone of your posts in the past few days!
Seem to be well researched and thought out. Very different from some of the pumping, bashing and drivel seen in the past year or two. The facts and sources coupled with some obvious thought make for some interesting reading. Not sure of your motivations - I assume make money - but makes for refreshing reading and stimulating some of my own perspectives.