Bombardier Inc (B) (BBD.B.TO)

(Market Call Minute) There are too many questions about how they find the ‘C’ series. There are better places to be.

He would steer clear of this. There is way too much uncertainty. The recent announcement by the Québec government of taking 49.5% is a bet that the C series is good and that is kind of betting the farm away. There is no guarantee the plane will work and it is up against stiff competition. Too much debt and too much uncertainty. Also, doesn’t like the dual class share structure.

Most stocks that go down, and heavily, do rise again. They have to start having orders. Any good news will give you a trading opportunity. He keeps wondering about averaging down which he has hardly ever done.

This is high, high risk. There is a dual share structure with the family. This company has made a lot of mistakes. He doesn’t like dual share structures.

This really goes back to the airline side. They seem to be able to get into good contracts on rapid transit, trains, railroads, but the plane side is really where the company could fail if they don’t get off the ground. Any participation in the stock is high risk, but if the risk turns out to be alright, the rewards are going to be substantial. If you own, you may be waiting a long time to get some of your capital back. He owns some of their preferreds.

Airbus confirmed it is no longer in talks about a stake in the ‘C’ series. The Paris air show had no sales and so it dropped. That was the kiss of death for this one. He would avoid this stock.

It could go to zero. They have way too much debt. It has been poorly managed. It has poor shareholder structure and you don’t have any rights. The controlling shareholder family has a history of treating themselves too well. It is in significant financial stress.

Hope springs eternal. He cannot think of a single reason to own it. The family still controls it. They have bet the farm in going up against BA-N with the `C` series. He would avoid it at all costs.

He does not think they will go bankrupt. The governments would not let it happen. He knows they could sell the train division. That would wipe out the debt. The question then is if the ‘C’ series is going to fly. He thinks eventually it will. But it could be dead money for a while.

(A Top Pick May 22/14. Down 14.7%.) (7.35% bond maturing in 2026.) Pretty much everything went wrong about 9 months ago. Bought this because he felt that over time their new C series would be built and would be quite successful. Since then, their business jet division had some issues and they had to shut down a Lear jet plane project. Their Global 7000-8000 has been delayed. Even their Global 5000-6000 has seen lower sales. Holding this bond going forward should be fine. They face challenges, but feels most of those challenges are in the rear-view mirror. Once they start selling the C series they won’t be spending as much developing or burning as much cash flow.

Had owned this before, but was very afraid of the debt they had taken on to finance the C series. Because of the delays, he had expected there would be more debt. Performance was better than expected. Remembers the old management that was looking through rose coloured glasses. He is afraid of the balance sheet. It could potentially be a better stock later on when they know they have more orders and once the C series is actually getting ready in the final stages, or up and it is being used. This is in a very, very dangerous space.

He would wait because the volatility is so high. People are doubtful they are getting orders for the ‘C’ series. The recent rally was speculation. If it goes back down it would be a speculative buy.

He has been short since the $2.50/$3 level. His view has been that the ‘C’ series was not going to be a success. There were two turnovers in the sales associates and no sales recently. In a year or two, this company could be bankrupt. He is short. If they don’t sell planes it could be trouble for them.

They put so much into the C series that it really has to work. He thinks the Québec government would do a lot to help them. It may not be the same company in a year if they can’t get the C series to go. Wait for them to come out and show you the C series is going to work with 350-400 orders, and then it will be a free-for-all to get in it.

This is so hard to value. We know that the business jets have been weak, which leads to lower margins. Somebody needs to take this company out behind the barn and shoot it. He can’t see any sense in buying this.