Bombardier has a “compelling valuation” according to an RBCDS analyst. There are now 20 buys against 2 sells, quite a turnaround in sentiment that had been unreservedly negative, almost comparable to RIM. By the way, this stock now has a capitalization of around 6 bln, well below RIM’s. It yields almost 3%, trades at a p/e of 7 and has lost half its value in the last year, and almost all of it over the past 10 years.

The company recently won another 700 mln. order from Stuttgart’s transit system and is virtually the only company left making trains. Same thing with the medium sized jets even if they share that position with the Brazilians. These things are simple not going to go out of fashion any time soon. Anyone who has seen John Candy’s movie “Planes, Trains & Automobiles” will know how important and durable these things are, Bombardier covers 2/3 of them.

The EW patterns are not clear. A large A-B-C correction from $26 to $2 could have been it. If so the stock is in a new bull market since then but the patterns are not clear. What is clear is that the stock is pretty close to the 20+-year line that connects all bottoms. Perhaps a good time to buy? See also previous entries for this stock!

We liked this stock right at the low of $2.25 and sold at $5.70 (see previous blogs) mentioning that we liked the stock for the long-run as well and look at it again. I neglected to do that. Today the profits reported were 82% higher than last time and the company at long last seems to be firing on all cylinders. If you like “infrastructure”, this is as pure a play as you can get. Here are the charts;

The drop from $26 to $2 qualifies as a bear market. As the last leg down in 2008 is a very clear 5-waves (see previous blogs) and therefore probable a c wave, the best count is an a-b-c X a-b-c. From there a new bull market should start. If that is correct you are now in a third wave of the first upleg. This could and should ULTIMATELY lead to a new high years from now. In the mean time if wrong expect at least an a-b-c counter-trend move as we have seen so many of, which should still take us to about $8.

Below was the chart then, just a few days before hitting a low;

Bombardier is a model EW stock doing exactly what one would expect. It did a beautiful 5 waves down, showing alternation between 2 and 4 and the last thrust out of the wave 4 triangle equates pretty precisely with the mouth of the triangle AND the low occurs more or less straight under the apex of same triangle. No wonder we felt very comfortable recommending a buy at around $2.25. Subsequent to that the stock has continued to be a model citizen in that it has done a model a-b-c retracement, pretty well to the 62% level and just a little above the wave 4 level. The wedge is fairly plain to see and therefore we would sell if you still owned it.

However looking at the longer term, given that the stock came from $25, is an infrastructure play if there ever was one, is the only manufacturer (apart from Brazil’s aircraft manufacturer) in this particular space and has had some good orders recently. it is entirely possible that we are on a real bull market for this one. So we would keep monitoring this with an eye to perhaps buy it back sooner than later. Click on the charts to enlarge.