When Will These Prop Sticks Break?

When I was a broker part of my routine was to read financial reports and analyst documents of companies. This was during the period of "when stocks could do no wrong" earlier this decade. One company who was the darling (and remains so) of everyone was the basket case known as Bombardier. Once a proud, innovative business the company languishes as a corporate beggar.

While Canadian analysts fell over themselves selling the stock to investors, American firms were more sober. One company, Credit Suisse First Boston, never bought the hype as I recall it.

It turns out they were right.

There's no true investment value to Bombardier. How can there be one when a company relies on corporate government hand outs to bail it out?

Ah yes, the corporate hand out for losing industries. A classic Canadian business trait.

For the record, Bombardier is not the only one.

I recently had a conversation with an investment banker and we discussed how here in Quebec it feels as though behind every company there's a government stick propping it behind the scenes. The province is littered with unprofitable businesses who get to continue operations because they provide jobs. When people say Canadians are not productive this is one component of the argument. Of course, the owners of these "businesses" that churn loss after loss drive around in Land Rovers.

I love reading these "top 500 companies list" in Canada and Quebec. Aside from the fact that already the quality and depth of the 300 companies in the TSX is thin, it's strange that we actually have 500 companies of note to rank. Of course we don't. When you look at the companies many are far from "best managed" or innovative. Many are public companies and others are private companies connected with the government.

But hey, as long as "we're not American" that's all that matters.