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JimVanMeerten (67.58)

Not too late to join the party at Ford

Recs

9

January 12, 2010 – Comments (4) | RELATED TICKERS: F

Sometimes you can see a good investment but sit on the sideline trying to make up your mind too long. When I began looking for an addition to my S&P 500 portfolio I screened on Barchart for the S&P 500 companies with the highest relative price strength and Ford ( F ) came up on the top of the list. At first I was a little skeptical because I'd watched it run on up and in the back of my mind thought it might have had its run but the numbers tell me otherwise.

Ford seems to have a good solid plan to take advantage of the recovery and also seems to be at the center of the Buy American ideas that appear to be sweeping the country. The forecast for survival is better than the prospects for GM or Chrysler for those who wonder if the company will be around to honor their warranties. They are producing the products that the American public likes. It has the auto market covered with 4 major divisions: Auto manufacturing, automotive systems, auto financing and truck and auto leasing through it's Hertz division.

The stock has had price appreciation in 12 of the last 20 trading sessions and is 4 for the last 5. The price appreciation in the last 65 days of 76.06% gives me butterflies. The stock has a buy signal on 12 of the 13 technical indicators on Barchart for an overall buy rating of 96%

There are 15 Wall Street analysts following the company and although they aren't predicting sky rocket sales they are looking for a 15% per year EPS growth for the next 5 years. Short interests are falling from a high last year at 292 million to around 140 million at year end.

Other sites like the stock too. Wall Street Survivor readers give the stock a 5/5 Survivor Sentiment and over on Motley Fool the CAPS members vote 5536 to 2496 that the stock will out perform the market. The All Stars are more positive with a vote of 1313 to 387.

The stock does meet my normal criteria:
1 - Price appreciation on better than 50% of the recent trading sessions

2 - A Wall Street following that predicts increased sales and earnings

3 - A falling short interest

4 - Confirmation from other popular sites that I appear to be on the right side of the stock.

Recommendation: The auto industry will be in the center of our recovery and this is the most successful American auto company. If you're looking to add to your foundation portfolio of S&P 500 companies try to buy Ford below 12 and put a protective stop loss in no lower that 9. Move it up as the stock appreciates.

Disclosure: No positions in Ford at the time of publication.

Jim Van Meerten is an investor who writes on financial matters here and on Financial Tides. Please leave a comment below or email JimVanMeerten@gmail.com.

4 Comments – Post Your Own

#1) On January 12, 2010 at 1:05 PM, RagingBull0 (48.64) wrote:

I started watching it when it was at $2.  I didn't buy it at $7.  And now I hesitate about jumping in at $12 after such a big runup in price.

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#2) On January 12, 2010 at 1:45 PM, russiangambit (29.49) wrote:

Well, I just red-thumbed it today.

In real life I've been long Ford several times  in the $4-8 range. But now the valuation is ridiculous. How fast are you expecting Ford to grow to justify the valuation?

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#3) On January 12, 2010 at 4:53 PM, JaysRage (90.49) wrote:

I agree with russiangambit that F is a loser at this stock level.   By the way, it's two-stars on CAPS.   If that many people don't like it, it's a risky play, at best.    

I saw your plug for your investing site and strategy, and I'm not sure that I can think of a more guaranteed way to lose money. 

1) Pick stocks that have already run more than 50%, meaning that everyone knows about them and they are no longer under-priced (or at least not as under-priced as they were before they went up 50%).

2) Pick stocks that analysts have already upgraded or made positive statements about meaning that everyone knows about them. 

3) Pick stocks that an investing site has picked as a top stock, guaranteeing that everyone knows about them. 

It is encouraging that you want to make sure that they are at least growing revenue and earnings......but if they've gone up 50% in price, are they growing revenues and profits at the same rate?  

About the only thing that I agree with is checking with CAPS to try and find out if this community agrees with the pick.   But if you go ahead and ignore that and buy a two-star stock that has all of the above characteristics, it's a sure way to lose money.  

Frankly, I'm stunned that you consider yourself a professional investor.    There is nothing worse than perfect execution of a bad strategy, so I hope that you somehow make mistakes and don't follow through on your plan.  

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#4) On January 19, 2010 at 6:41 PM, rosemanjhk (57.02) wrote:

I bought at $2 and sold at $9 for a nice profit.  I am very leery of the debt problem.  I do have Ford on my watch list, and would agree that it would be a decent long term buy, but not at this level.  It WILL fall back into single digits at some point.  I would recommend buying in on that weakness, preferably around the sub $9 level.  I feel the next year or two will be rocky, but it will come out on top eventually...

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