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A Special Report

3 Rotten Shares to Sell, and 1 to Buy Today

The S&P/TSX Composite has continued the post-election rally way into the New Year, as gains have been carried by the energy and financial sectors.

But investors need to be wary right now.

A looming real estate crash and tightening trade restrictions with the U.S. could dramatically dampen any positive economic outlook. Turns out the days of easy profits may have disappeared and investors could risk getting caught owning the wrong stocks at exactly the wrong time.

So what are the three stocks you should actively be avoiding right now?

Bombardier (TSX:BBD.B)

When it comes to investing for the long-term, generally, steering clear of companies that have become reliant on government bail-outs to survive is a solid rule-of-thumb to follow. While Bombardier’s history runs deep in this country, this is exactly the position that the company is in. The province of Quebec has spent $1 billion on bailing them out already, and the Government of Canada could be next. Regardless, the company has proven itself to be a deplorable allocator of capital, and with the founding family still in charge, our team thinks there’s little reason to believe this will change. Financial risk remains significant, and even though elected officials appear keen for the exposure, we’re anything but. In our mind, Bombardier’s a no-fly zone.

Encana (TSX:ECA)

Strategy is a critical underlying fundamental when it comes to running a business, and we can think of no company that we believe has been more lost when it comes to strategy than Encana. First, the company cut loose its oil assets (which subsequently became Cenovus Energy) to focus exclusively on natural gas. Natural gas prices subsequently cratered to below $2.00/MMbtu. So, the company decided to get back into oil, which subsequently cratered, falling below $30/barrel earlier this year. This strategic flip-flopping has led to more than $10 billion in asset write-downs since 2012 and even though the company’s had some luck with asset sales (never a great sign), the team thinks the balance sheet remains questionable. There are better ways for your portfolio to gain energy exposure.

BCE (TSX:BCE)

Our analysts think BCE doesn’t offer the same potential for disaster as the other two, however, that’s about the most positive thing we can think of to say about this Canadian behemoth. The Canadian telecom space is effectively saturated, meaning, where BCE, or its peers for that matter, are going to find growth in the years ahead is somewhat of a head scratcher to us. However, our analysis suggests the company trades at a valuation that suggests growth will exceed what’s occurred over the past decade. We disagree and will not be surprised if BCE’s annualized return over the next decade is below the current dividend yield offered.

Breakthrough IPO Receives Rare Endorsement…

Its happened less than a handful of times in the last 23 years, but recently, a Canadian IPO was carefully recommended by co-founders of The Motley Fool, David and Tom Gardner, as well as Stock Advisor Canada’s very own Lead Adviser, Iain Butler.

You see, there’s a tiny company headquartered in Eastern Ontario that some people are calling “Canada’s Answer to Amazon.com”.

Compared to the three potential disasters we mentioned above, this is one “under-the-radar” company that we think could deliver a boatload of profits for investors.

In fact, CEO Tom Gardner recently went on BNN’s Money Talk to discuss what drew him to this little-known company – the one that has $400 million in cash, zero debt, and has gotten rave reviews from all its customers (which include companies like Patagonia, Budweiser, The Economist, Tesla, Google, and Red Bull!).

To read our detailed Motley Fool investigative account on this company… and to find out how you can get our premium research report, “Canada’s Answer to Amazon.com”, valued at $29, simply click right here.

Truth be told, we’ve all missed out on countless opportunities like the one above. But, for the sake of your future and for the hope of financial independence, I hope you won’t miss out on this one.

So please go ahead and click here, to read the full story on what this stock could mean to you.

 

 

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. David Gardner owns shares of Alphabet (C shares), Amazon.com, and Tesla Motors. Tom Gardner owns shares of Alphabet (C shares) and Tesla Motors. The Motley Fool owns shares of Alphabet (C shares), Amazon.com, and Tesla Motors.