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Oct 16th, 2009 – Comment

The global airlines industry has been facing headwinds as they adjust to seeing the volume of business travel slow.


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Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


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Hi Lou,

Just wondering what to do with my BBD.B shares. I got in back in 2006 when the shares were selling for less than $4. I watched my investment double only to see it crash back down to about $3.50 (at which point I bought more). I have enjoyed a nice ride since the March lows but I don’t want to make the same mistake again. There is a golden cross in place, all kinds of contracts announcements but I heard some analyst suggesting that it might be time to sell… Has BBD.B ran out of steam or is it going back to the 2008 highs?

Dan

Hi Dan,

Great to hear that you want to book some profits and pay some taxes on your gains. A lot of people freeze up when it comes time to sell because of the taxes due. Think of it this way paying taxes is a signal that you have made money as opposed to taking a tax write off which means you lost money!

bbd

You are right when you say that Bombardier Inc. ( BBD.B TSX) has had a great run since March but it is meeting some resistance at $5.00 and then again at $5.50 which it needs to get through to start an assault towards the previous high near $9.00 that it touched in 2008.

bbd2

The three month chart shows the pull back from the $5.00 level and the MACD is not suggesting an advance.

At close of trading yesterday you have a 41.7% gain on the shares you bought at $3.50. Not to shoot a running horse but ask yourself if you think that BBD.B has another 41.7% in it?

When I look at BBD.B I think about who they sell to. Trains to governments and planes to airlines. The train business has always been the low margin unit for Bombardier and there is lots of competition for the government contracts.

The global airlines industry has been facing headwinds as they adjust to seeing the volume of business travel slow. Business travel is the high margin end of the airlines business. This and other factors raise the question of how healthy the global industry is and will they be willing to order jets given the hit to they cash flow.

Profit on the table, resistance at $5.00, clients with eroding margins, previous experience watching profits drift away, all suggest its time to look for an exit.

Happy Capitalism!

Categories: Aerospace
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