On Thursday, David Burrows, President of Barometer Capital Management was on BNN’s Market Call with host Mark Bunting to to talk about North American large cap stocks.
Burrows, whose current major holding is cash, says that worldwide economies are in the process of deleveraging, so it’s “not the kind of market to be in economically sensitive areas like commodities and industrials”. One industrial Burrows is avoiding is Bombardier (TSX:BBD.B), the once high flying defense and aerospace company that is celebrating its seventieth birthday this year.
Burrows pointed out that from the late 1980’s to the late 1990’s Bombardier was a stock that everyone felt they had to own, because it was beating the street with machine like regularity. During that time, Bombardier was Canada’s greatest growth stock, he said. While the company’s rise was steep, the stock has gone through a long slow selloff since that continues to this day.
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The Barometer Capital fund manager says that at eight times earnings, Bombardier is “not that expensive” but he would like to see more evidence that the company’s finances are improving before jumping in. While Burrows says he doesn’t think we are seeing a “significant operational improvement” in the company, the technicals say the stock has based out and will have a move a some point. Burrows says he would like to see Bomardier’s stock break the $5 mark, and until then he will merely be keeping an eye on it.
Bombardier is divided into two segments that deliver roughly the same amount of revenue, Bombardier Aerospace, and Bombardier Transportation. The company’s roots go back to 1937, when a Quebec mechanic named Joseph-Armand Bombardier dreamed of dreamed of building a vehicle that could “float on snow.” A few years later schoolchildren in rural parts of that province were among the first people in the world to ride snowmobiles, which began as large, multi-passenger vehicles. Bombardier’s invention was actually called the “Ski-Dog” as it was intended to replace dog sleds. A painter actually misread the info and painted “Ski-Doo” on an early model. By the time of Bombardier’s death, in 1964, his eponymous Company had sales of $20 million. Bombardier’s later ventures into aerospace and railway grew the company to the internationally recognized giant it has become, with more than $18-billion in annual revenue.
Share of Bombardier closed Friday at down 1.3% to $3.71