When thinking about which stocks to own in this heightened stock price environment, investors should consider various factors. As a conservative long-term investor myself, focusing on companies with solid balance sheets and a clear pathway to cash flow growth over time is the way to invest.
This is particularly true for investors with a relatively long-time horizon. Owning stocks that require something good to happen to see their stock price rise rather than owning good companies that need to have something bad happen to go down, is a losing strategy in my opinion.
Air Canada (TSX:AC) is one such company that I would put in the former bucket. With international border restrictions significantly impacting the airline’s cash flows in the near term and casting doubt over the company’s solvency in the medium and long term, such restrictions need to be lifted and a solution for the coronavirus needs to be found before serious stock price appreciation can take hold, in my view.
This reality implies some serious volatility could be on the horizon. While some aggressive investors may want to take advantage of a perceived mispricing opportunity with Air Canada’s stock price remaining depressed, the safest thing for investors to do is to keep this stock on their watch list and monitor for a major news event that may fundamentally change the investment thesis for Air Canada.
Invest wisely, my friends.
