Where I’d Find Value in Canadian Stocks for My Long-Term Holdings

Written by Puja Tayal at The Motley Fool Canada

Spending time in the market can generate wealth if invested in the right stocks. But how to find stocks that can thrive in the long term? Investing in stocks is investing in a business, and businesses have ups and downs. If you put yourself in the business owner’s shoes and see the economic, political, regulatory, and industrial environment and the management’s approach, you can get a fair idea of which business will be the wealth generator.

A business is as good as its management. If they are distorted from reality, then it is a stock to steer clear of. However, management that accepts the headwinds, cuts outlook if needed, and makes difficult choices to sustain in crisis could provide value in the long term.

One such example is Bombardier (TSX:BBD.B). Its management made some difficult choices of downsizing from several businesses of passenger planes and trains to just business jets. Four years of focused efforts in business jets and aftermarket services pulled the company from a turnaround stock to a growth stock, and if things go as planned, even a dividend stock in the future.

Before the first-quarter earnings, Bombardier CEO Eric Martel expressed concerns about tariff wars affecting jet deliveries and refused to give guidance until there was clarity. Once the United States imposed tariffs on Canada in March and Bombardier’s products were exempted from tariffs, the company gave strong guidance.

In its 2025 guidance, Bombardier’s focus is on improving profitability. It expects revenue to grow by 6.7% and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) by 14%. It also expects its free cash flow to more than double to US$500 million in the lower range of its guidance.

The business jet maker looks to derive value from its business jets by modifying them for defence and selling pre-owned aircraft. It has already monetized the maintenance and aftermarket service of its business jets in the air and will look for targeted acquisitions to expand this business.

The management’s strong execution of its plans makes it a value stock even at a $100 share price if you hold it for the long term. The last five-year turnaround drove the stock price up 700%. The next five years could give strong double-digit growth and even marginal dividends.