Brian Madden - BNN - TOP PICK Bombardier (BBD.B TSX)
With a new management team, a slimmed-down single segment focus on private aviation and a market-leading product portfolio, Bombardier now has a high visibility path to growing free cash flows and balance sheet de-leveraging after two lost decades of blundering. The company has a $15 billion order backlog and is several years ahead of key aerospace rivals in driving innovation in medium and long-range aircraft and in fulfilling robust demand. Moreover, with an increasing installed base of Challenger and Global Express aircraft in service the addressable market opportunity for aftermarket parts and service continues to expand.
Additionally, Bombardier is strategically opening new service centers globally to capture market share gains in this less discretionary aspect of its business. Further upside opportunity exists in the small, but high-margin, military command/control and reconnaissance planes it furnishes to NATO allies as geopolitical risks loom large in a number of conflict theatres. This is a “long memory” stock, having burned a whole generation of investors with a 99 per cent drawdown from 2000-20. As such, many investors have yet to refresh their research and still consider the company un-investable – which it no longer is. Despite having risen a mighty 1,200 per cent off the 2020 lows, the shares remain undervalued at a mere 12 times expected earnings and we foresee blue skies ahead.
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