Goldman sparks a 12% move in Ford by telling you what I said weeks ago
The stock of Ford Motor Company is up over 12% today on the heels of an upgrade by Goldman Sachs (see article: Ford shares rally on Goldman Sachs upgrade to buy). In upgrading Ford, the Goldman analyst said:
...Ford, which has avoided a government bailout up to this point, will get a boost in market share due to the "diminished presence" of both General Motors and Chrysler following likely bankruptcies in the coming weeks.
Hmmmm, this sounds awfully familiar. Sorry Goldman, once again your equity research analysts are a day late and a dollar short. Several weeks ago I ended my CAPS red thumb on Ford and wrote the following:
What's Bad for GM & Chrysler is Good for Ford
In any normal world where Uncle Sam didn't feel the need to prop up every failing company, both GM and Chrysler would be complete toast. Their existence outside of bankruptcy depends solely upon the kindness of government at this point. One way or another, whether GM and Chrysler are forced to file for bankruptcy or not they are going to have to seriously reduce their production and get major concessions from the UAW and probably bondholders as well.
No matter how this plays out, clearly GM and Chrysler have too much production capacity right now. In order to survive or emerge from bankruptcy these companies are going to have to get leaner and meaner. Substantial production cuts by its two domestic rivals is very good news for Ford as well. Ford will be happy to gobble up whatever market share GM and Chrysler are forced to give up.
Furthermore, if GM and Chrysler are able to win major concessions from the UAW either now or after bankruptcy, there is a good chance that Ford will be able to negotiate similar terms without having to go through nearly as much pain.
Increased market share and lower labor costs are a good thing for Ford.
What a mess. As someone who earns his livelihood in the auto industry and knows countless people at both the manufacturer and dealer level, these events sadden me to know end. I can't say that I'm surprised. My first two picks in CAPS were to give GM and Ford the red thumb. I am seriously considering ending my Ford short pick in CAPS though. As I just mentioned, much of the bad news that is out there about GM and Chrysler is actually good news for Ford.
I'm not exactly saying that I am a raging Ford bull. I still am very afraid of anything in the auto sector and I would never put real money there. However, I see enough positives coming from GM and Chrysler's problems for Ford to consider ending my CAPS short of it.
OK, I'll stop before I break my arm trying to pat myself on the back, but if there's one thing that I know it's autos. Besides, if I was really good instead of just ending my short I would have used the fact that I figured this out before the major analysts to flip the trade and go long F. I'm sure that's what Goldman Sucks somehow secretly did this morning before its analyst issued the report.