Sunday, March 7, 2010

Is Ford Motor stock still a good buy here?

Dow Jones 10,566.20 (Up) Week Ending 03-05-2010

I got together with my Wilson cousins and their husbands and my brother and his wife over the weekend. My cousin Ellen and her husband Paul have amazingly built from parts laid out in their driveway not one, but 2 Model "A" Ford automobiles. Henry Ford would be proud.(Henry pictured below smiling)

Paul, a lifelong builder and driver of race cars, does this all without the aide of an overall schematic of how the whole thing goes together. I should also mention that they are both in their seventies and Paul goes to kidney dialysis 3 times a week. Now that is dedication to doing what you love. Thank you very much for a lovely dinner and delicious cheesecake. Let's see now if we can make you some money to buy some of those Model "A" Ford parts.

Now a look at Ford Motor Company (Symbol F , $13.00 per share). Here is what I know. There are a bunch of people out there who own this stock at 6 bucks a share because it sat at that price for what seemed like forever in 2009. Then the price moved to 8 dollars a share for quite awhile. So there are a lot of investors that could easily take profits here. I can also tell you that there is a kind of cohesion (like with water) at work in the stock market. This cohesion creates a behavior whereas when a stock is going down people will hold on to it for dear life hoping it will go back up. The same is true on the upside move. When a stock is way up the tendency is to hold on because it feels good to have a winner and you don't want to miss out on more of the upside movement of the stock. So I think there may be a little profit taking at $13.00, but not a stampede to the exits. Another thing I can tell you about automobile companies, as an amateur historian of the stock market. When auto companies start losing money they can rapidly lose grand amounts of it. But when they are running right and starting to make money with the gigantic sales revenue streams that they have, (Ford even in a bad year did 118 Billion in sales in 2009), then earnings can expand more rapidly then in any other industry and just explode to the upside. This is what has happened in the past. It is the reason GM and Ford were able to offer all those great pensions and medical benefits when things were going right in earlier days.

Ford earnings for 2010 will be around .90 cents per share. In 2011, earnings are projected at $1.37 to $1.40 per share. A stock with those earnings should trade even with a PE as low as 8, at a range of between $18.00 to $24.00 a share. If you purchase Ford on Monday and hold on to it for two years, even at the most conservative estimates you should have a minimum of a 15% annual return over the two years and it could be very much higher. Ford's current 12 month total return is 394%, so there is quite a bit of potential here.

So get your investment car in gear, (Paul told me the 1928 Model "A" has a 3 speed), and make some money to build your own dream car.


1 comment:

  1. AUTOS
    JULY 22, 2010, 4:51 P.M. ET.Profit Expected at Ford as Sales Climb
    .ArticleComments (9)more in Auto Industry News ».BY MATTHEW DOLAN
    Ford Motor Co. is expected to report a second-quarter profit of $1.6 billion on Friday, compared to a $424 million loss a year ago, on the strength in its increasing ability to sell pricier models and persuade customers to pay for expensive options, analysts say.

    The success with improving pricing and model mix comes on the heels of a healthy sales quarter in the U.S. for Ford, which outpaced the overall industry in its critical home market.

    Ford's combined U.S. sales in April, May and June grew 21% over the same period last year, compared to 17% for the industry. ...