The Motley Fool

Market Crash: Accumulate Aerospace Stocks Like Air Canada (TSX:AC) 

An airplane on a runway
Image source: Getty Images.

The markets have begun to stabilize. Optimism has returned, and investors are beginning to question if we are near a bottom. But the truth is, no one knows when the market crash will hit bottom. 

Timing the market is not a wise strategy, and in times of considerable uncertainty, it’s best to average your positions. No one knows when the next bull market will arrive. We may be in the start of a new one right now, or the market may tank yet again. 

What we do know however, is that several industries are still struggling to gain a footing. Aerospace is one such industry and now is the time to be accumulating industry leaders. 

One of the market crash’s first victims

Ever since COVID-19 started to make headlines in a meaningful way, the outlook on the airline industry began to sour. It didn’t take long for Canada’s largest airline to begin cancelling flights in and out of China.

It was immediately evident that a global pandemic could be a devastating event for Air Canada (TSX:AC)(TSX.AC.B) Among the first stock to drop, Air Canada is now down 65.84% in 2020 and is trading near three-year lows. 

Amid the carnage, there is one important takeaway for investors: Air Canada isn’t going anywhere. Airlines are receiving financial support from the government and in due time, borders will re-open and planes will once again take to the sky. 

Once the market crash touches bottom, it won’t take long for Air Canada’s stock to also make a big move upward. For the patient and risk-inclined investors, accumulating Air Canada at today’s levels may prove to be a winning strategy.

A Dividend Aristocrat cutting the dividend

The market crash has claimed another Aristocrat, the fourth thus far. There was only one Canadian Dividend Aristocrat in the aerospace industry: CAE Inc (TSX:CAE)(NYSE:CAE).

Unfortunately, the company’s 12-year dividend growth streak has come to an end, as it’s suspending the dividend. CAE also announced that it will suspend the company’s share repurchase plan. 

Although disappointing, conserving cash as it rides out the market crash is a good thing. It’s responsible management and shows that the company has investors’ best interests in mind. Year to date, this global simulation company is down by approximately 50%. 

For its part, CAE is now trading at levels not seen in five years. The good news is that the company is still operating as an essential service, and its global presence is mitigating the impact of any one country’s COVID-19 efforts. 

Similarly, the company’s Defence & Security segment is seeing less disruption as “CAE provides mission critical services worldwide.” CAE’s Defence & Security and Healthcare segments account for 43% of revenue. 

Speaking of healthcare, CAE is also re-directing efforts to help fight COVID-19, providing complimentary training seminars to health care providers and has a working ventilator prototype. Once the ventilator prototype is approved for use, it has the capacity to produce thousands of units. 

There is no question that COVID-19 mitigation efforts are impacting CAE’s operations in a meaningful way. However, the company has the financial means to ride out the market crash.

The company is also likely to see a meaningful rebound much quicker than Air Canada. At today’s levels, it has the potential to be a blink-and-you’ll-miss-it opportunity. 

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 Mat Litalien has no position in any of the stocks mentioned.

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