A Sure Thing
In the stock market, there are no "sure things", but there are educated guesses based on analysis. Admittedly I had a REALLY good first day and I don't expect that to continue, but there is one pick I made yesterday that sure feels like a "sure thing".
That pick is FORD. At around $2.75, the company is valued just under $7 billion dollars. There investment (what's left of it ~ 11%) in Mazda, plus Volvo is worth about $750 million (that's in today's value, not last years).
There are SERIOUS problems with Ford (it's not under $3 share because investors are stupid). It's long term debt/equity ratio is approaching 25 (compare that with GE at under 3).
So what makes this a buy, let alone a "sure thing" - the answer is the pre-packaged bankruptcy of GM and Chrysler. Any deal the UAW gives the other two will have to go to Ford - that's been the way the UAW squeezed concessions out of the company's before, by making a deal with one then demanding the same deal from the other two. But the UAW is a small part of why Ford is a steal at these prices. GM and Chrysler account for 33% of domestic auto sales. Most of their revenues come from trucks (over 55% for GM and over 65% for Chrysler). With a pre-packaged bankruptcy, the government will keep the suppliers Ford needs in business by guaranteeing GM/Chrysler IOU's. According to the BEST estimates, 20% of buyers will stay away from company's in bankruptcy. Instantly 7% of the auto market opens up to Ford, Toyota and Honda. Toyota should take the lions share and gobble up 3%, Ford 2.5%, and Honda about 1% - with the last 0.5% going to the smaller auto makers.
With auto sales in the toilet (currently an 11 million run rate), Ford grabs a quick 275,000 units - enough to slow their loss rate and generate enough revenue that they won't need to borrow cash through 2009. GM/Chrysler will continue to be saddled by poor product line-ups through 2010, but Fords plan to bring over the hot selling Ford Fiesta and new Ford Focus from Europe should energize their car sales into next years turn around - couple with a Ford F150 that's only a year old, and two new hybrid cars.
Ford will have a lineup that is very similar to Toyota's (though Fords will still be top heavy on trucks). And I strongly doubt Ford will hit its peak of $30/share anytime soon. But come 2011, this stock should surely triple to around $8.50/share. I'm long Ford in CAPS, and long Ford in real life. That said - anything can happen, even to a sure thing, so DIVERSIFY your portfolio!
Good luck and good investing.