BN:CC - I Wouldn't Touch This Stock With a 10-Foot Pole: Here's What I'd Buy Instead
2024-01-05 15:30:00 ET
I’m a pretty open-minded person. I have very flexible beliefs — about stocks as well as politics, music, and pretty much everything else. However, there are some stocks that I would not touch — not even with a 10-foot pole. Whether due to a reputation for fraud, low-quality financial statements, or just a prolonged lack of profits, these stocks raise too many red flags to be worth buying. In this article, I’ll explore one such stock that I wouldn’t even consider investing in — and what I’d buy instead.
SNC Lavalin/AtkinsRéalis
AtkinsRéalis ( TSX:ATRL ), previously known as “SNC Lavalin,” is a Canadian engineering and construction contractor. It builds and designs things like bridges, mine shafts, buildings, and even whole cities! In these projects, it works with large clients, such as governments and major corporations. The massive size of its clients nearly guarantees that AtkinsRéalis has a lot of money coming in — at least, most of the time.
Enormous ethical issues
The reason I would not touch AtkinsRéalis with a 10-foot pole is because the company suffers from massive governance issues. It was accused of bribing the government of India to get an enormous contract in that country. Then the company bribed a Federal Minister to secure a contract for Montreal’s Jacques Cartier Bridge. Later, it was accused of bribing several officials, including Federal Bridge Corporation chief executive officer Michel Fournier, who accepted $2.35 million in bribes related to the construction of the Jacques Cartier bridge.
By far, the biggest Bribery scandal AtkinsRéalis ever got caught up in was the SNC Lavalin affair. This affair involved the company bribing Libyan officials in order to win contracts in that company. That happened in 2011 but didn’t come into public view until 2019, when Prime Minister Justin Trudeau was accused of pressuring one of his ministers, Jody Wilson-Raybould, to not publicly disclose information about the bribes to the public. Wilson-Raybould followed Trudeau’s orders but later said that she felt pressured to do so. The company ultimately had to pay $280 million in fines related to the initial bribing of Libyan officials. No charges were ever laid concerning the subsequent political scandal in Canada.
Business not doing as well as it looks
AtkinsRéalis stock has risen dramatically this year, gaining 64% in the last 12 months. One of the main reasons it’s up so much is because it’s growing rapidly. In the trailing 12-month period, its revenue grew 8.7%, and its adjusted earnings grew 160%. It looks impressive, but there were other metrics that weren’t so good.
For example, GAAP (generally accepted accounting principles) earnings per share declined 58%. Also, the recent, better results come only after an awful series of years for the company. In 2019, the company made $2.4 billion in earnings; then in 2020, due to reputation hits stemming from the SNC-Lavalin affair, the company lost money. In subsequent years, it made a bit of profit, but not much. It’s been disappointing.
What I’d buy instead
Although I’d never buy AtkinsRéalis stock, I think its industry — infrastructure — is worth investing in. It’s for that reason that I hold a bit of my portfolio in Brookfield ( TSX:BN ) stock.
Brookfield is an asset manager that runs and invests in a number of different infrastructure funds. These funds have purchased some incredible assets, such as the world’s biggest nuclear energy company, Westinghouse, and a number of shipping and transportation companies. These assets are of high quality and are essential to building a green future, so it should come as no surprise that Brookfield is investing in them heavily–and paying dividends to its shareholders all along the way.
The post I Wouldn’t Touch This Stock With a 10-Foot Pole: Here’s What I’d Buy Instead appeared first on The Motley Fool Canada .
Fool contributor Andrew Button has positions in Brookfield. The Motley Fool recommends Brookfield and Brookfield Corporation. The Motley Fool has a disclosure policy .
2024