Happy New Year! Today’s Top Pick for 2013 comes from Vivian Lewis, editor of Global Investing. Lewis’ 2012 pick, an RBS preferred, was among the top five best-performing picks last year.
“Bombardier, Inc. (BDRAF on the Pink sheets or BBD on the TSX, $4) was called a buy by UBS Canada because of its second collaboration accord with China’s Commercial Aircraft Corp (COMAC) over product development on cockpit machine interfaces, electrical systems, and other technology. While no orders have been booked, the collaboration opens the way to Bombardier selling its C-series planes in China.
“The Swiss bank estimates as many as 350 Bombardier planes could be sold to China yearly over 20 years, a total of 7,000 aircraft. Moreover, the Canadian firm has already locked up 38% of the Chinese market, UBS’ Hilda Maraachlian wrote. Her 12-month target for Bombardier is $5.50/share as it gets airborne in China. It is around $3.50 today (December 5).
“Also BDRAF may also get some rail contracts next year despite the current Chinese government’s decision to put the brakes on fast passenger train spending in 2012. Next year a new team arrives in Beijing. Meanwhile BDRAF is signing huge monorail construction and equipment deals from Riyadh to Sao Paulo.
“This is potentially the best stock in our portfolio, grossly undervalued because it is French Canadian, family-controlled, and ignored because it is a two-fer, hard for single-industry analysts to quantify because it combines rail with air transport. Its Q3 report was mixed, with sales lower (big ticket items are lumpy), down to US$4.3 billion, while profits rose 9% to $192 million. In the nine months its net income fell 10%, to $584 million or 32 cents per share. This stock is ripe for take off. And while you wait it pays a 3% dividend.”
- Vivian Lewis, Global Investing, December 5, 2012