Investors often develop a preference for certain types of stocks. As a result, those stocks tend to line our portfolios as some of our favourite investments. The inverse condition also exists on the other end of the spectrum. We tend to steer clear of those one-time investments that resulted in steep losses. Even worse, this bias tends to blind us from what could be a super opportunity for growth. This is especially true during times of volatility.
Let’s try to reverse that bias by taking a fresh look at the growth potential of Bombardier (TSX:BBD.B).
Bombardier is a very different company today
When Bombardier announced plans to spin off its rail unit, that raised eyebrows. To a lesser extent, that was also the case when Bombardier offloaded its turboprop and passenger jet segments.
What remains at Bombardier is the company’s business jet operation, which was relatively quiet throughout Bombardier’s much-publicized troubles. Thankfully, the segment was working on its next-generation business jets, which are in strong demand.
The flagship of Bombardier’s new fleet is the Global 7500. The 7500 is the largest and longest-range business jet on the market today. In short, the 7500 can fly more people further (and faster) than other business jets on the market. Specifically, we’re talking about a range of over 14,200 km at a speed of Mach 0.925.
Demand for the 7500 remains strong, but that’s not the only refreshed jet Bombardier has on the market. An updated design for one of Bombardier’s smaller jets is also coming to market. The 10-passenger Challenger 3500 boasts new innovating features, such as voice-controlled cabin lights.
Strong demand is keeping Bombardier’s order book growing. Earlier this year, Bombardier announced its largest order yet for the Challenger — a US$534 million order for 20 jets.
This makes Bombardier an intriguing opportunity for growth investors.
Bombardier is investing in its (Global) vision
Earlier this month, Bombardier announced a new final assembly facility for the Global aircraft line to be developed in Mississauga. The facility, which will be housed at Toronto’s Pearson airport, is set to come online in 2023. The site will provide jobs to 2,000 employees at the existing Downsview site.
This seemingly regular announcement by Bombardier is great for a few reasons and is nothing short of a masterstroke.
First, this new facility is replacing the current Downsview site. More specifically, this new site is giving a new home to the 2,000 skilled workers at the current Downsview site. This was a major concern for the company since selling the facility back in 2019 for US$635 million.
Second, this new facility reflects Bombardier’s commitment to its Global line of business jets. In other words, Bombardier is putting its financial muscle to work. That investment comes at a price of US$400 million, which will be put to good use. Bombardier’s flagship 7500 is one of the aircraft slated to be built at this new facility.
Finally, let’s talk about the environment. Bombardier noted that this new facility will have a significantly lower energy footprint than the Downsview facility. Specifically, Bombardier noted that energy consumption will drop nearly 60%, and greenhouse gases will be slashed in half.
Final thoughts: Is there an opportunity for growth?
No investment is without risk, and that certainly includes Bombardier. The stock may be well on its way to an impressive turnaround, but there are still plenty of risks. Additionally, that turnaround potential is there, particularly over the long term. And that’s where the opportunity for growth lies.
In my opinion, Bombardier warrants a small position in your well-diversified portfolio. The company now has a sense of clarity over what it does. Bombardier is focusing solely on that business jet segment, for which there is strong demand. If Bombardier can deliver orders to match that strong demand, 2022 will be a very good year for the company.
Investors looking for shorter-term results, or perhaps an investment that can provide income, would be best suited looking at other investments.