The market gives us an incredible number of investment options to choose from that are constantly in a state of flux. Some of those investments can become lucrative opportunities for growth- or income-seeking investors, and others are options that investors would be better left on the sidelines.
Here’s a look at two very different stocks that are best left outside your portfolio.
Great product. Poor execution
Investors that have been following the market for some time will no doubt recognize Bombardier (TSX: BBD.B) and the missed opportunities that continue to plague the company.
Bombardier is known around the world as a well-known and respected manufacturer of planes and trains. In fact, if your commute involves a train, there’s a good chance it’s on a Bombardier-built train.
Turning to the aerospace segment, Bombardier’s development of the CSeries aircraft was viewed as an innovative, if not completely evolutionary step for the entire industry, by catering to the underserved segment of jets with 100-150 passengers. By now, we’ve heard what happened with the CSeries, or, as it is now referred to, the A220.
Then there’s the newly announced Global 7500 business jet, which delivers an improved experience and range for customers in the niche business jet market. In fact, the Global 7500 is so popular that it is already sold out through the next few years.
So, despite the innovative, new product and strong market position, why should investors bypass Bombardier? That comes down to Bombardier’s inability to meet delivery schedules.
An existing contract with the TTC in Toronto to replace the city’s fleet of streetcars has been delayed and plagued with problems. A similarly large contract with Metrolinx for the delivery of over 100 new light-rail vehicles has also been delayed several times, and Bombardier now faces the prospects of fees if delays continue.
That perennial tardiness that Bombardier is known for is starting to cost the company. Bombardier has already been barred from submitting a quote to provide subway cars for New York City’s massive system, and here in Canada, the company lost out on projects for both Montreal and Via Rail to competitors. In all cases, Bombardier’s lack of commitment to timelines was cited as a primary reason the company was bypassed.
Once Bombardier learns to better adapt to and fulfill its scheduled commitments, the company and its billions in backlogged contracts may resemble a promising investment, but for the moment, the stock is far too risky.
Where does paper belong in a digital world?
That may be harsh, but that’s the situation that Indigo Books (TSX: IDG) continues to struggle with.
As the largest bookstore retailer in the country, Indigo has an impressive network of stores, both big and small, under several different, well-known brands. The only problem with that impressive network of stores, however, is that consumers are increasingly turning to online sales and larger internet commerce sites in lieu of traditional physical stores.
Looking back over the past few years of Indigo’s quarterly results provides us with some insight into the shifts in both the market and consumer tastes. Specifically, over the past five years, while revenues steadily increased from $180.8 million in the first fiscal quarter of 2015 to $205.4 million in the first fiscal quarter of 2019, sales from Indigo’s larger brick-and-mortar stores grew at a much slower rate, barely registering growth of $10 million in that five-year period.
Furthermore, revenue attributed to print sources, such as books, magazines, and newspapers, declined in that same five-year span from comprising 68.1% of all revenue in fiscal 2015 to just 57.6% of revenue in the first fiscal of 2019.
During that same period, online eReading sales also declined notably from just over 2% of revenue in 2015 to dropping off entirely as a separate category and being consolidated into another category by the start of fiscal 2019.
In short, those investors looking for a retail stock to add to their portfolio would be better suited looking elsewhere.
