Addicted to News? Add Bombardier (TSX:BBD.B) Stock to Your War Portfolio

Bombardier Inc. (TSX:BBD.B) and one other big-name aviation stock may rocket if international conflict erupts. It may be unlikely, but should you bet on it?

| More on:

News addicts of Canada, here’s a stock suggestion for you: Bombardier (TSX:BBD.B). If you’ve been following recent developments in the Middle East, you may be of the opinion that all is not looking so rosy there, especially when it comes to oil routes. While it makes sense to hold oil-weighted stocks for the same reason, it may be time to add some military stocks to your war portfolio as well.

Let’s see what kind of market fundamentals are on the military investment radar today, and see who else besides domestic aviation stock Bombardier is requesting permission to land.

Bombardier is looking like a dodgy stock today

Bombardier is discounted by over 50% compared to its future cash flow value, but that’s one of very few indicators of value you’ll get for this stock today. A loss-making company with negative assets, all three of this stock’s usual market fundamentals that we comb through are illegible today, including the P/E, PEG, and P/B ratios.

A 49.5% expected annual growth in earnings is pretty exciting at first glance, though seeing that Bombardier has negative shareholder equity (in other words, its liabilities exceed its assets) is bad news, though this should have been obvious from its negative P/B ratio — bad sign indeed and one that may override both its deep discount and annual earnings outlook.

Is this American alternative a better quality stock?

Value investors should probably consider adding Bombardier’s competitor Boeing (NYSE:BA) to their war portfolios instead. If things go bad to worse, stock in this U.S. defense and military super stock will skyrocket, and domestic investors wanting to war-proof their holdings are going to want to be there when it does.

Discounted by 28% compared to its future cash flow value, Boeing is in greater demand than its Canadian cousin. A P/E of 21.6 times earnings is acceptable, if not fantastic, while a PEG of 2.2 times growth is at least readable. The P/B ratio is even messier than Bombardier’s, though, with Boeing likewise having negative assets.

A 9.9% expected annual growth in earnings isn’t as giddy as Bombardier’s, but feels rather more safe and reassuring, if either of those words can comfortably be applied to a military hardware stock. A dividend yield of 1.97% automatically raises the quality level of this stock above Bombardier’s.

While both stocks listed above look, on the face of it, to be good value, they are both rather risky plays if you take into account those negative P/Bs – or at least they would be if they weren’t both quite so important to the aviation and military infrastructure of the Western world.

The bottom line

Consider Boeing and Bombardier as speculative war plays, along the lines of a FAANG, blockchain, or marijuana investment, albeit cheaper and potentially more vital and serious when it comes to the real world. Should war break out in the Middle East, both of these stocks may well improve, adding considerable upside. Think about adding oil-weighted energy stocks for a fully-rounded war portfolio; after which, turn on the radio, make sure your torch has batteries, and hide under the table.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Victoria Hetherington has no position in any of the stocks mentioned.

More on Dividend Stocks

dividends can compound over time
Dividend Stocks

Want a 7% Yield? The 3 TSX Stocks to Buy Today

These TSX stocks are offering high yields of over 7%, making them attractive for investors seeking steady passive income.

Read more »

how to save money
Dividend Stocks

The Smartest Dividend Stocks to Buy With $200 Right Now

These smartest dividend stocks can consistently pay and increase their dividends in the coming years, irrespective of the macro uncertainty.

Read more »

Electricity transmission towers with orange glowing wires against night sky
Dividend Stocks

3 Utility Stocks That Are Smart Buys for Canadians in November

These utility stocks benefit from regulated businesses and generate predictable cash flows that support higher dividend payouts.

Read more »

Start line on the highway
Dividend Stocks

Invest $10,000 in This Dividend Stock for $600 in Passive Income

Do you want to generate passive income? Forget the rental unit! This option will save you the mortgage yet still…

Read more »

Senior uses a laptop computer
Dividend Stocks

1 Reliable Dividend Stock for the Ultimate Retirement Income Stream

TD Bank (TSX:TD) shares are way too cheap with way too swollen a yield for retirees to pass up right…

Read more »

A worker drinks out of a mug in an office.
Dividend Stocks

Is Brookfield Infrastructure Partners a Buy for its 4.75% Yield?

Brookfield Infrastructure Partners (BIP) has a 4.75% dividend yield. Is it worth it?

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

Where to Invest Your $7,000 TFSA Contribution

The TFSA is attractive for investors who want to generate tax-free passive income.

Read more »

The TFSA is a powerful savings vehicle for Canadians who are saving for retirement.
Dividend Stocks

TFSA Investors: 3 Dividend Stocks Worth Holding Forever

These TSX stocks have the potential to grow their dividends over the next decade, making them top investments for TFSA…

Read more »