On Tuesday, the S&P 500 was about unchanged while Toronto was up 0.3%.
Heineken was up 2.1% (this is the Euro price as we analyze this stock in Euros)
Bombardier’s CEO seemed almost giddy about the Canadian government lending it some $372.5 million. Normally borrowing money should not make one giddy. The exception might be where you are such bad financial shape that you can’t believe anyone would lend you money. In this case the giddyness may have to do with the fact that this loan arguably sends a message that Bombardier has the support of government. Potential buyers of planes may be more confident that Bombardier will be around to deliver the planes. Some will call this a bail out. But this is a repayable loan.
So far, the record has been that those who have loaned money to Bombardier have made good returns. (Which is certainly not the case for longer term equity investors) This development could increase confidence in Bombardier’s ability to make good on its loan and preferred share obligations. This move adds to my confidence in holding the Bombardier preferred share that is on our list. In retrospect I should have added to my position at the really low prices of about 12 to 18 months ago. However, given I already had substantial dollars invested in it and given the precarious state of the company at that time, it did not seem prudent to do so. Also, at that time (as I explained on November 10, 2015) with the Bombardier common B shares trading under $2.00, the company had the right to convert the pref shares to common shares and that was a negative feature. Having not added to my pref share position at the very low prices, it is psychologically harder to think about doing so now at higher prices, but with the lower risks today, the pref shares may not be a bad bet at all.