The markets have started to stabilize. Optimism is back and investors are starting to wonder if we are near the bottom. But the truth is that no one knows when the stock market crash will bottom out.
Timing the market is not a wise strategy and in times of considerable uncertainty it is best to average your positions. No one knows when the next bull market will arrive. We may be in the process of starting a new one at this time, or the market may recover further.
What we do know, however, is that many industries are still struggling to gain a foothold. Aerospace is one of these industries and now is the time to build up industry leaders.
One of the first victims of the stock market crash
Since COVID-19 started making headlines significantly, the outlook for the airline industry has started to deteriorate. It didn’t take long for Canada’s largest airline to start canceling flights to and from China.
It was immediately obvious that a global pandemic could be a devastating event for Air Canada (TSX: AC) (TSX.AC.B) Among the first stocks to drop, Air Canada is now down 65.84% in 2020 and is trading near the three-year lows.
In the middle of the carnage, there is one important point to remember for investors: Air Canada is not going anywhere. Airlines are receiving financial support from the government and, in due course, the borders will reopen and planes will rise again.
Once the stock market crash hits bottom, it won’t take long for Air Canada stocks to make a big upward move. For patient and risk-averse investors, building Air Canada to current levels can be a winning strategy.
A dividend aristocrat cuts the dividend
The market crash has made another aristocrat, the fourth to date. There was only one Canadian aristocrat in dividends in the aerospace industry: CAE Inc (TSX: CAE) (NYSE: CAE).
Unfortunately, the company’s 12-year dividend growth sequence has ended because it suspends the dividend. CAE also announced that it will suspend the company’s share buyback plan.
Although disappointing, keeping money while avoiding the stock market crash is a good thing. It is responsible management and shows that the company has the interests of investors at heart. Since the beginning of the year, this global simulation company has lost around 50%.
For its part, CAE is now trading at levels never seen in five years. The good news is that the company still functions as an essential service, and its global presence mitigates the impact of a country’s COVID-19 efforts.
Likewise, the Defense and Security segment of society experiences fewer disruptions because “CAE provides mission critical services worldwide”. CAE’s Defense and Security and Healthcare segments represent 43% of revenues.
Speaking of health care, CAE is also reorienting its efforts to fight COVID-19, offering free training seminars to health care providers and has a prototype working ventilator. Once the prototype fan is approved for use, it has the capacity to produce thousands of units.
There is no doubt that COVID-19’s mitigation efforts have a significant impact on CAE’s operations. However, the company has the financial means to overcome the stock market crash.
The airline is also likely to see a significant rebound much faster than Air Canada. At the current level, this can be an opportunity to blink and you will miss it.
The crazy contributor Mat Litalien has no position on any of the titles mentioned.