Still, this stock trades near the bottom of its historical range. Many analysts think the valuation will ultimately hit zero. What’s the truth?

Bombardier is a goldmine

You can make huge sums of money with Bombardier stock over a short amount of time. That’s because the underlying business is inherently volatile.

“Bombardier is the definition of an industrials company, similar to General Electric,” I recently explained. “For years, it designed and built big, heavy things like railroad cars and airplanes. You’ve likely benefited from the company’s products before, even if you didn’t know it.”

Making big, heavy, expensive things can make you a huge profit. Or, it can result in major losses. The pendulum can swing in either direction.

“Because its business is capital-intensive, revenue often comes in waves,” I concluded. “The company could experience very little sales traction for months, only to receive several multi-billion orders in a single week. This lumpiness is a big reason why Bombardier stock has been so volatile over the years.”

The trick to this stock is knowing which side of the wave we’re on. If you can master that, the future is clear.

This is the future

Just because someone’s making money with a certain investment doesn’t mean you should follow. Like Buffett advises, it’s not necessarily smart to pick up pennies in front of a steamroller. The same could be said of Bombardier stock.

In 1996, BBD shares were priced at $3. In 2003, they were priced at $3. In 2018, they were priced at $3. You get the point. This company has existed for decades, but very little long-term value has been created.

To be sure, there were some big swings along the way. Shares have doubled in value dozens of times. They’ve risen 1,000% or more on several occasions. But in all cases, the gains were eventually erased.

What does this mean for you? The biggest takeaway is that long-term investors should look elsewhere. When a company shows you its true self over a multi-decade period, you’re best off believing it.

Bombardier isn’t alone, either. Its U.S. counterpart General Electric has shown a similar propensity to destroy shareholder value. In 1996, shares were priced at $13. In 2009, shares were priced at $13. Today, shares are priced at $13. You’ve seen this story before.

Will Bombardier shares spike or plunge in future years? The answer is simply both. This is a volatile stock fuelled by a volatile business model. There’s certainly money to be made, but you can say the same of a casino.

For prudent, long-term investors, stay away from this stock, even if shares look historically cheap. The longer you hold the stock, the more likely it becomes that you’ll lose money. It’s not the fault of poor management or bad policy; rather, it’s simply the reality that every industrial business must endure. Just make sure that you’re not tricked into joining the ride.

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Is now the time to buy?

Growth is starting now

When do you want to buy growth stocks like BlackBerry? The best time is before the growth begins. Once it does, the valuation multiple will skyrocket. You can sense the difference by comparing BB stock with CrowdStrike (NYSE:CRWD) stock.

In many ways, CrowdStrike is similar to BlackBerry. Both companies focus on next-gen software to improve the cybersecurity capabilities of their customers. Yet CRWD stock trades at 52 times sales and BB stock trades at just six times sales.

Why the giant gap? The answer is simple: one company saw sales grow by 86% last year, while the other company experienced a sales decline of 14%. I’d pay a lot more for the first business, and so would the rest of the market.

But this is where you should get excited. By betting on growth before it arrives, you can score a valuation that’s nearly 90% cheaper than the peer group. You just have to take a bit of extra risk. Looking at the facts, BlackBerry appears poised to deliver.

Watch these markets closely

BlackBerry’s growth rates aren’t like CrowdStrike, but there’s reason to believe they’re set to rise in the months and years to come. The company spent the past decade winding down its failed smartphone business. Now, nearly all of its revenue is tied to cybersecurity software, which as CrowdStrike has demonstrated, can grow at rapid rates for extended periods of time.

Software is a wonderful place to be. Profit margins are high, sales are often recurring, and growth is simply a download away. Within the software space, cybersecurity looks particularly lucrative.

Every day, thousands of new devices get connected to the internet. All of these devices are vulnerable to hacking. That’s annoying and costly when it’s a computer or phone, and potentially lethal when we’re talking about self-driving cars. BlackBerry’s products help protect all of these endpoints, even red-hot segments of the market like crypto and blockchain.

“Malicious actors amassed $1.4 billion in stolen crypto over the first five months of 2020 alone,” I recently stressed. “This problem will only grow as cryptocurrencies like Bitcoin go mainstream. If you believe in decentralized currencies like Bitcoin, you should be bullish on cybersecurity firms that protect the billions of endpoints that become vulnerable due to poor tech or simple user error.”

Time to bet on BlackBerry stock?

Stocks like this are how big money is made. Shares could rise 1,000% based on multiple convergence alone. Then add the underlying organic growth to your returns. We’re talking a 10, 20, or even a 30 bagger.

The bet is that BlackBerry is about to turn on the jets. It has great products targeting hyper-growth market segments. Once the market gets a whiff of this growth, shares will rise sharply. The only question is whether you will wait for definitive proof.

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Here’s what you need to know.

This changes everything

Like every other airline, Air Canada struggled in 2020, losing nearly $1 billion every quarter. I wrote over the summer that a government bailout would be the only ending to this story.

“Unless conditions improve dramatically over the next few months, a government bailout is almost guaranteed for Air Canada,” I’d warned. “The business is responsible for nearly half of Canada’s domestic air traffic. It employs tens of thousands of people. The government has a vested interest in making sure operations continue without disruption.”

My predictions proved prescient. This week, the Canadian government swooped in.

“The federal government’s nearly $6 billion financial support package for Air Canada announced Monday includes billions of dollars to help the struggling airline rebuild from the effects of the COVID-19 pandemic,” reported Global News. “The airline has been given seven years to repay any loans borrowed from the government refund facility, at an annual interest rate of 1.2%.”

The news is a mixed bag. On one hand, we now know that the company won’t go bankrupt. On the other hand, the company will be under immense pressure from regulators and government officials. Should you bet on a boom or bust?

Will Air Canada stock surge?

It’s helpful to look at what happened to other businesses when they received government bailouts.

“During the financial crisis of 2008, dozens of companies received bailout funds in the U.S. and Canada,” I recently explained. “Some were terrific investments. Bank of America stock, for example, has risen 500% since 2009. Many businesses, however, ultimately went to zero despite receiving government support.”

What will the future hold for Air Canada? Whatever happens, this is truly a high-risk, high-reward opportunity.

With insolvency off the table, it’s all about a return to profitability. Encouragingly, the company made more than $2 billion in advance ticket sales last year. Many of those included cancelled flights, which must be refunded due to bailout conditions, but the high figure does point to pent-up demand for air travel.

Several industry groups report flights are now averaging around 70% capacity utilization. That’s up from 60% the month before and just 10% at the depth of the crisis. One report concludes that “the industry is bouncing back sooner than expected.”

With new funding, Air Canada could consolidate the market, controlling more market share as demand recovers. Its purchase of Transat for $190 million was called off this month, meaning there are even more funds available for strategic acquisitions. Buying a competitor is a risky move right now, but it could set the company up for an incredible return.

Of course, this story isn’t without risk. New variants are spreading across Canada and the world. Regional lockdowns are creeping into daily life again. There’s appetite for air travel, but we still don’t know how that will translate into real demand this year.

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Do you think this stock is your secret to riches? Think again. The investments below are superior.

Prepare for the new world

What made Enbridge so successful in recent decades? The answer shows you how to make money over the next few decades.

Enbridge is the largest pipeline operator in North America. This is a middleman business at its finest. You have a bunch of fossil fuel producers on one end, with a bunch of consumers on the other end. How do you transport oil and natural gas between each party? Pipelines are the safest, fastest, lowest-cost option.

In many ways, pipelines are like toll roads. Except in the case of pipelines, there are often zero alternatives. That’s because they’re extremely costly to construct. Regulatory pressures reduce industry supply even further. The result is that pipeline incumbents have monopolistic pricing power over their customer base.

There’s only one problem: fossil fuel demand is entering secular decline, presenting real challenges to Enbridge’s business model. We’ll be using oil and natural gas for decades to come, but there’s no doubt renewables will eat into demand. That’s what makes a stock like Hydro One (TSX:H) so appealing.

Hydro One owns transmission lines in Ontario. Its infrastructure covers 98% of the province. Transmission lines are basically pipelines for electricity.

Enbridge uses its infrastructure to transport fossil fuels, which are slowly on their way out. Hydro One uses its infrastructure to transport electricity from renewable sources, which, by all indications, is entering long-term demand growth.

With a 3.4% dividend and mid-single-digit annual growth, this stock won’t blow you away. But when you’re looking for future-proof stocks, owners of transmission lines is a great place to start.

This stock is the next Enbridge

There’s no doubt that renewable energy is the future. This is a generational transition that will transform one of the biggest markets in the world. You can profit directly with stocks like Brookfield Renewables (TSX:BEP.UN)(NYSE:BEP).

“Brookfield owns one of the largest renewable energy portfolios of any publicly traded company,” I recently explained. “Its diverse holdings comprise solar, wind, hydro, and even battery storage. It’s a one-stop shop for renewable energy exposure.”

Plus, it seems like renewable energy markets exhibit less volatility than the markets for fossil fuels, which Enbridge relies on. Just look at what happened during the COVID-19 crash.

“The U.S. added a record amount of wind and solar energy last year even as the coronavirus was crippling the economy,” reported CBS. “Installations of wind and solar power soared 61% over the previous year, with 33.6 gigawatts added to the grid in 2020.”

With a 2.8% dividend and multi-decade runway for growth, Brookfield Renewables is significantly better positioned than Enbridge. Fossil fuel demand will slowly shrink over time, while renewable energy has nowhere to go but up.

Around $1.5 trillion was invested in renewable assets over the past five years — a figure that should surpass $5 trillion over the next five years. Brookfield Renewables should be a major benefactor.

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The two stocks below are your best bets when looking to grow capital as fast as possible.

Don’t be afraid

Too many investors are afraid of being too early. But that’s the risk you must assume if you want to compound capital at hyper growth rates.

Just take a look at BlackBerry (TSX:BB)(NYSE:BB). No, this isn’t a smartphone stock anymore. Today, it’s a pure play bet on cybersecurity software.

“Last year, BlackBerry booked zero revenue from physical goods,” I recently explained. “Its sales base is now comprised completely of software and related services, the result of a multi-year turnaround effort. This company is currently a software pure play, and the market hasn’t caught on yet.”

The opportunity is clear. BB stock trades at 5.7 times sales. Competitors like CrowdStrike trade above 50 times sales. You can make nearly 1,000% in profit through valuation conversion alone.

Why is BlackBerry such a cheap growth stock? Because its growth hasn’t actually started. Management spent years amassing an impressive portfolio of tech that will profit from some massive opportunities, including self-driving cars and the internet of things. For example, its Cylance division detects threats before they occur by using proprietary artificial intelligence networks.

The bet is simple: if growth trends upwards, expect the valuation multiple to skyrocket. This is a story that could persist for a decade or more. You just need to take your bets before the initial data comes in.

This growth stock is worth the premium

What happens when you buy an amazing stock later in the game? You get Shopify (TSX:SHOP)(NYSE:SHOP). Shares trade above 70 times sales! Just don’t think it’s too late to profit.

Let’s look at the numbers.

“Shopify is currently valued at roughly $180 billion. Amazon has a valuation that’s ten times higher,” I wrote last week. “I expect that gap to converge over time. Why? Because Shopify is taking advantage of Amazon’s strengths without needing to compete head-on.”

Shopify has cracked the code to hyper growth. In many ways, its business model is actually superior to Amazon’s.

“At first glance, Shopify isn’t an Amazon competitor at all: after all, there is nothing to buy on Shopify.com. And yet, there were 218 million people that bought products from Shopify without even knowing the company existed,” explains tech strategist Ben Thompson. “The difference is that Shopify is a platform: instead of interfacing with customers directly, 820,000 3rd-party merchants sit on top of Shopify and are responsible for acquiring all of those customers on their own.”

Yes, SHOP stock is pricey, but when you zoom out, it’s clear that the size of the company should eventually surpass $1 trillion. Platforms are usually winner-take-all markets, and Shopify has a hefty lead over the competition.

Of course, the biggest gains accrue to the earliest investors, but there’s still years of runway left.

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If you’re searching for bargains, start with the stocks below.

The ultimate cheap stock

For years, BlackBerry (TSX:BB)(NYSE:BB) was the laughing stock of the market. After attaining a 20% global market share for smartphones in 2008, the company burned through billions of dollars as its brand collapsed. Today, nearly no one uses a BlackBerry phone.

But this is no longer the story of a smartphone manufacturer. Today, BlackBerry doesn’t produce a single phone. It’s pivoted from hardware to software, with a particular focus on a lucrative corner of the market.

“BlackBerry is specifically focused on cybersecurity software, which should be one of the biggest growth engines for the sector over the next decade,” I recently explained. “Its Cylance division, for example, can detect threats before they happen by using advanced artificial intelligence networks.”

Despite a bright future and a revamped business model, BlackBerry stock still trades at a 50-70% discount to its cybersecurity software peer group. Jumping in now provides the most upside for risk-tolerant investors.

High risk, high reward

Air Canada (TSX:AC) is a controversial stock. Some analysts think shares are about to double, back towards their historical highs. Others thinks the company will ultimately go bankrupt, folding under the pressure of COVID-19.

What’s the truth? That depends on your view of the future.

This is certainly a high-risk, high-reward scenario. Get it right and you can double your money. The trick is determining whether the COVID-19 pandemic is behind us. We have early signs that passenger demand is picking up, albeit from horrendous lows. Last year, Air Canada flew at less than 10% of total capacity.

If the pandemic is actually behind us, expect demand for air travel to soar this year. That’ll take bankruptcy risk off the table, and may allow Air Canada to consolidate the market. But if we get another coronavirus surge or economic setback, this stock will have been cheap for a reason.

This is your best bet

I love Shopify (TSX:SHOP)(NYSE:SHOP) stock, even though few people would call it cheap at 48 times sales. But if you understand this company, you’ll know that it’s deserving of the premium. Despite always having a steep valuation, shares have risen 4,000% since going public in 2015.

The secret is that Shopify is a platform business, which often is winner takes all. Just look at Amazon. That stock has been surprising the market with impressive growth rates for decades.

“Unlike Walmart, currently weighing whether to spend additional billions after the billions it has already spent trying to attack Amazon head-on, with a binary outcome of success or failure, Shopify is massively diversified. That is the beauty of being a platform: you succeed (or fail) in the aggregate,” explained Ben Thompson, founder of Stratechery.

Few people understand that Shopify’s long-term growth potential will make the current valuation look like a steal. Use this ignorance to your advantage.

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There are two tricks that help you accumulate these incredible gains. First, stay patient. Even the highest-growth stocks take a few years to fully develop. Second, stick with tech stocks. In fact, go even deeper than that.

Focus on these stocks

Most businesses aren’t capable of producing 9,000% returns, even if you give them decades to do so. These are rare investments, so you need to stack the odds in your favour.

The best way to do this is by focusing on specific areas of the stock market that have proven capable of producing massive profits. Over the past decade or two, that meant sticking with tech stocks. That’s a good place to start, but there’s actually a segment of the tech industry that can grow much faster than the rest: software.

“Imagine a company that sells computer hardware,” I recently explained. “To book a sale, this company needs to convince customers that its computers are the best. Competition is fierce. Once a customer is convinced, the business then must physically produce another computer. That takes time and money. Finally, to book a repeat sale, the business needs to convince the customer to buy yet another computer.”

The result is that hardware businesses have a natural upper limit to growth as it takes time and capital. Software stocks, however, don’t have such hurdles.

“Customers simply need to click download,” I stressed. “It’s fast and free. And software is usually sold on a license basis, so repeat sales are booked automatically.”

Constellation shares can soar

You should now be convinced that software stocks can grow faster than nearly any other business type. Growth is instantaneous and nearly free. If you want to capitalize, Constellation is the stock for you.

Constellation actually takes this whole approach another step further. Not only does it stick exclusively with software, but it focuses on solutions that are niche and mission critical. Niche products have limited competition, improving pricing power. Mission-critical products, meanwhile, reduce customer turnover as it’s difficult to move on to a competitor with so much at stake.

The best part is that Constellation has found a way to grow consistently, even after attaining decent scale. That shouldn’t be surprising if you’ve followed the software market for a while. Many of these products are winner takes all.

“Our research revealed that higher growth rates portend sustained success,” noted global consultancy McKinsey.

Time to buy?

Great stocks don’t come cheap. You’ll have to pay 7.2 times sales for the option to own Constellation shares. That’s slightly above its five-year average of 5.2 times sales, but it’s worth the cost of admission. Even if you bought shares at their annual peaks since 2006, you would have made a killing.

The trick to 9,000% returns isn’t snagging the perfect price. Instead, you must find businesses that can produce above-average returns for years on end. Constellation is that kind of stock.

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There’s opportunity here, but only if you pay attention.

Pay attention to these details

Enbridge is one of the biggest pipeline operators in the world. It’s the largest in North America. That means it makes money by transporting fossil fuels from one place to another. As long as the world consumes oil and natural gas, there will be a place for its network.

While the company largely charges for its services based on volumes, not commodity prices, it still is exposed to long-term pricing fluctuations. After all, you’re able to charge one price for a customer making heavy profits at $100 per barrel oil versus another price when customer margins are thin, say at $50 per barrel.

Volume-based pricing means Enbridge is insulated from short-term swings in commodity prices. But what happens when we’re in a lower-for-longer scenario? What happens when oil demand goes on a multi-decade decline due to regulatory and climate-related pressures? Then there could be trouble.

The trick is to understand how pipeline networks are built. This type of infrastructure can cost millions of dollars per kilometer to construct, so businesses like Enbridge take out of a ton of debt, hoping to pay down those loans once the pipeline enters service.

For decades, this strategy worked perfectly because pipeline demand kept going up. But if fossil fuel consumption has already peaked globally, as oil heavyweight BP believes, Enbridge could be forced to pay off these long-term loans with slimmer and slimmer cash flows.

This dynamic could force a reckoning. But before it does, there could be opportunity.

Time to buy Enbridge stock?

Here’s the good part: the market already understands this story well, pricing ENB stock at a multi-year low. The dividend, which has been raised every year since 1995, now pays nearly 8% on an annualized basis. Compared to its past, this stock is super cheap.

Shares are cheap, but Enbridge’s challenges aren’t necessarily arriving this year. In fact, it could take another decade before pipeline profitability slips below the required level to service debt payments.

“Now that growth opportunities are limited, the market has soured on the stock, but it still has plenty to offer in terms of income,” I recently explained. “Don’t expect double-digit returns for decades on end, but as Enbridge shares stabilize, there’s an opportunity for reliable, market-leading dividend income.”

This is especially true since many former growth investments are set to come online. With few places to put that inbound cash, expect it to go straight to shareholders. Just look at the new Line 3 project.

“Once Line 3 is in service, it’s going to contribute a lot of free cash flow — and this year we anticipate it will be about $200 million in Q4 — with volumes and EBITDA ramping up in 2022,” said CEO Al Monaco.

Enbridge stock won’t rise by 100% or fall by 50% this year. Instead, it’ll likely become a slow-moving income investment, perfect for those chasing big but reliable dividends.

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If you want to own the best growth stocks of 2021, here’s your chance.

Pay attention to cannabis again

Cannabis was the top growth market of 2018. Anything that had to do with marijuana skyrocketed in value. We’re not talking small returns either. Many stocks doubled, tripled, or even quadrupled in value. All of that happened in a matter of months.

Then the cannabis bear market of 2019 occurred. The COVID-19 crisis of 2020 didn’t alleviate any of that pain, but in 2021, the market is set to turn a corner. Your best bet is HEXO (TSX:HEXO)(NYSE:HEXO).

Let’s first look at what fizzled this growth market a few years ago. Investors were betting on companies that could grow cultivation the fastest. Whoever produced the most marijuana received a higher valuation. I warned against this type of investing before the bear market arrived.

“Today, it’s not very profitable to grow staples like tomatoes, beans, rice, or cabbage. In another decade, there’s a chance that growing cannabis isn’t wildly profitable either,” I predicted. “Commoditization could be a lot closer than you think.”

Indeed, commoditization was closer than everyone thought. There still aren’t many sustainably profitable marijuana stocks, even if revenues still experience growth. That’s why HEXO is different.

“Think of HEXO as the Coca-Cola of pot,” I recently stressed. “It deals with a bunch of individual commodities, but it packages and brands those ingredients in a way that produces brand loyalty and sustainably high margins.”

Still trading well below its 2018 highs, HEXO is priced right for value-conscious growth investors.

This is my top growth stock

Few investors would call Shopify (TSX:SHOP)(NYSE:SHOP) stock cheap. It’s one of the priciest businesses on the market, at least when you look at the multiples. Yet time and time again, shares have proven worthy of their steep premium. Shopify stock has risen more than 40 times in value since going public in 2015.

What makes Shopify so special? It’s a platform business playing in one of the biggest growth markets in human history: e-commerce.

“At first glance, Shopify isn’t an Amazon competitor at all: after all, there is nothing to buy on Shopify.com. And yet, there were 218 million people that bought products from Shopify without even knowing the company existed,” explains tech consultant Ben Thompson.

Shopify is simply a platform. It built the infrastructure in which others can build on top of. This way, it takes a cut of all the sales that are processed on its platform without needing to drive those sales itself. It’s like a secret recipe for low-cost growth.

“The difference is that Shopify is a platform: instead of interfacing with customers directly, 820,000 3rd-party merchants sit on top of Shopify and are responsible for acquiring all of those customers on their own,” Thompson concludes.

Amazon remains nearly 20 times larger than Shopify despite their similarities. This “expensive” stock should continue to reward patient investors.

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This could be your shot to buy a blue-chip stock with an incredible income stream. Knowing that the company has raised the payout every year since 1995 should give you comfort regarding its sustainability.

Should you jump in?

Know these facts right now

If you want to secure a 7% annual dividend yield, you need to move fast. Let’s get straight to the facts.

Enbridge is North America’s biggest pipeline company. It transports nearly 20% of the continent’s crude oil, plus a big chunk of the natural gas. Historically, this has been a great business.

Pipelines are like toll roads: once constructed, the cash flow comes streaming in. Initial construction costs can reach several million dollars per kilometre.

With a pipeline network spanning multiple countries, just imagine how difficult it would be to replicate Enbridge’s asset base. It would easily cost $50 billion or more, although regulatory constraints would likely make it impossible anyway.

The point is that Enbridge owns enviable assets that are nearly impossible to compete with and produce huge annual cash flows, which the company then uses to support the 7% dividend.

Here’s the bad news

If Enbridge is such an amazing stock, why is it trading with a 7% dividend? Well, there’s some bad news, but if you understand this news fully, you can take advantage.

As a pipeline owner, Enbridge relies directly on two things: fossil fuel production and fossil fuel demand. Companies must be producing oil and natural gas that needs transporting to end users that require these fuels to be transported to them. Enbridge is simply the middleman, collecting its payment to connect each party.

When COVID-19 sent oil prices below US$40 per barrel, many analysts worried that parts of Enbridge’s customer base would go bankrupt, meaning an end to production. And with increasing regulatory and social challenges regarding climate change, the demand equation is under pressure too.

Enbridge is stuck between two difficult forces: potentially lower production and headwinds for long-term demand. These forces could imperil the dividend for the first time, hence the recent share selloff.

Should you buy this dividend stock?

As the spectre of COVID-19 slowly recedes, normal life is picking back up in many areas of the world. That means higher demand due to increased driving, flying, and everything else that consumes fossil fuels. Oil prices have already rebounded strongly, relieving one side of the pressure for Enbridge.

The other question is the demand cliff. While we’ll be using fossil fuels for decades to come, there’s no doubt that renewables will eat into that demand over time.

If that demand cliff is close — say, in the next five years — the dividend could be cut to preserve cash. But if that demand cliff is far off — say, a decade or more — there’s simply not much to worry about. Your investment decision hinges on where you think that demand cliff resides.

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