(B)(N) Air Canada Class B

Buckle-up. Turbulence ahead.

Drama. The year-over-year returns on Air Canada stock have averaged +96% per year for the last five years but before you decide to fly only in the Air Canada Class B from now on, there is an important caveat between the caviar and the peanuts – the year-over-year stock prices have varied between a disappointing (-43%) and a stratospheric (+345%) that nobody could predict and, so,  it’s quite important to know when to get on and when to get off in the absence of a future.

But despite all of that, we can get on now at the current sky-high price of $23.30 as long as we buckle-up and do everything that we can to guarantee 100% capital safety or risk losing it all (or half of it) on a bad day.

The Boarding Pass

Air Canada is the national toll road in the sky and it has a “stock price” because nobody wants to own it; it needs a lot of maintenance every day and it’s never paid a dividend and it’s earned a total of $2 billion on gross revenues of $70 billion in the last five years, inclusive, which takes a lot of financing on the day-to-day and the shareholders equity is only $1.2 billion against a debt of $13.9 billion which is a bank-like leverage at better than 8× on the debt to equity half-secured ($8.5 billion) by an aging plant and equipment on the ground and in the air.

The employees’ pension plan could have bought it all (or taken an ownership position) for $1 a share in 2012 and then managed the enormous cash flow of this company to run it their way and save their jobs, salaries and wages, and pension benefits.

But it’s still not too late now; it’s trading at $23 today and has a market value of only $6.2 billion which is up +60% this year, even though nobody knows what it will be in December if fuel prices rise and the economy wains or grows sluggish or the stock market bails on the tarmac for no reason but fear because Air Canada will keep-on flying even if it doesn’t make any money – it has to pay its bills or lose market share to WestJet, or the privately owned Porter Airlines, or a legion of regionals and foreign airlines and nationals; please see Figure 2 and 3 below for more details and a heads-up tutorial on how to buy Air Canada today (and click on them and again to make them larger as required).

Figure 2: The Flight Deck

Figure 3: The Air Canada (B)-Class Portfolio

For more information on real “risk management” in modern times and additional references to the theory and how to read the charts and tables, please see our Post, The RiskWerk Company Glossary and “(P&I) Dividend Risk and Dividend Yield“, and our recent Posts “(P&I) The Profit Box” and “(P&I) The Process – In The Beginning“; and we’ve also profiled hundreds of companies in these Posts and the Search Box (upper right) might help you to find what you’re looking for, such as “(B)(N) TLM Talisman Energy Incorporated” or “(B)(N) ATHN AthenaHealth Incorporated” or “(B)(N) PETM PetSmart Incorporated“, to name just a few.

And for more applications of these concepts please see our Posts which rely on the Theory of the Firm developed by the author (Goetze 2006) which calibrates The Process to the units of the balance sheet and demonstrates the price of risk as the solution to a Nash Equilibrium between “risk-seeking” and “risk-averse” investors within the demonstrated societal norms of risk aversion and bargaining practice. And for more on The Process, please see our Posts The Food Chain and The Process End-Of-Process.

And for more on what risk averse investing has done for us this year, please see our recent Posts on “(P&I) The Easy (EC) Theory of the Capital Markets” or “(B)(N) The Easy (EC) Theory of the S&P 500“, and the past, The S&P TSX “Hangdog” Market or The Wall Street Put or specialty markets such as The Dow Transports & Utilities or (B)(N) The Woods Are Burning, or for the real class action, La Dolce Vita – Let’s Do Prada! and It’s For You, Dear on the smartphone business.

And for more stocks at high prices, The World’s Most Talked About Stocks or Earnings Don’t Matter – NASDAQ 100. And for more on what’s Working in America, Big Oil, Shopping in America or Banking in America, to name just a few.

Postscript

We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product

The Perpetual Bond™
Alpha-smart with 100% Capital Safety and 100% Liquidity
Guaranteed
With No Fees and No Loads on Capital

For more information on RiskWerk, please follow the Tags or Categories attached to this Letter or simply enter Search for additional references to any term that we have used. Related data may be obtained from us for free in a machine readable format by request to RiskWerk@gmail.com.

Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”). The Canada Pension Bond®™, The Medina Bond®™, The Barometer®™, the Free Market Yield®™ and Extreme Economics®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.