Bombardier (BBD.B-tsx) has had some negative press on their weak competitive position. But investors have been aware of the stock's train wreck profile for a very long time.
In the late ‘80’s the investment community was already working Bombardier over for their revenue recognition policy. The belief was they were reporting revenue on long term contracts too early.
But this isn’t about the story behind Bombardier’s issues with products and the competitive landscape. That can be dissected from many sources. This is about the investment and how it relates to decision making in the management of a growth portfolio.
Signs of the Train Wreck
There have been numerous signals telling investors what decision they may use with BBD.B. The signals are objective and systematic, serving investors to make decisions without interference from random viewpoints and emotions.
Two charts have been provided below showing the price trend and investors behaviors. The first chart provides a number of sell signals. If the first one was ignored, other follow up sell signals would have confirmed an appropriate response which is to sell the entire position.
But the big picture reveals more.
The second chart is a longer term view, spanning ten years. There are two particularly significant reasons why investing in BBD.B is unnecessary and higher risk.
The stock price has historically been relatively low. At the 2008 peak, the share price was $9/share. Now that isn’t the lowest priced stock especially in the Canadian market. But there are thousands of alternatives that are substantially higher priced. If BBD.B is a better choice, the key word being better, than why hasn’t the stock managed to get to double digits?
More importantly, relative strength indications reveal the stock is a significant laggard. From the time the bull market started, March 2009, the stock’s recovery didn’t test the 2008 high. The current bull market’s leading stocks carved out new highs as early as 2009.
Relative strength is one of the highest ranked indicators for predicting future performance. If an alternative is doing better, the probability for that market or security to continue to do better is very high.
Thank Goodness For Buyers!
BBD.B is another example of the remarkably effective functionality of the market. Almost every single stock has a buyer and a seller at any time. Without it, there would be no market. But despite the approximately fifteen thousand choices in the U.S. and Canadian markets, many stocks are not worth considering. Individual investors (retail investors) don’t need a lot of stocks regardless of how large they consider their portfolio to be.
Why would Bombardier (BBD.B-tsx) qualify as an investment worthy of your money?
When you think about it, any fund manager who is buying BBD.B., at this point, should be fired. If your Investment Advisor thinks otherwise, he or she should also be fired. By you.
BBD.B., Ten Years