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Varchild2008 (85.27)

The Stupid Money sells off (F) Smart Money Buys it After

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August 24, 2009 – Comments (11) | RELATED TICKERS: F

Ok.. (F) Ford took a dive almost back to where it was last week Tuesday.  Does this spell the leg back down to $6.XX or even $5.XX where it was before the Q2 earnings report?  Is this the end of the (F) Ford rally?

Well, if the reason for the sell off / profit taking / shorting of (F) Ford today was due to the end of Cash for Clunkers then NO. 

What happens after Cash for Clunkers is the following scenario (which obviously is being completely ignored by the Mainstream Media and Wallstreeters today):

1) All Dealerships are sitting on the sidelines for quite awhile waiting for their Rebate money to arrive from the Government.

2) Once the Dealerships start to get their rebate cash, they will have to immediately pay their Payroll.  It's a cash flow business.  Payroll has to be paid.

3)  Next, many of the Dealerships have little to no CARS left on their lots.

4)  Gee...  What's step #4??  What happens next after Payroll is paid...and Rebate $$$ is finally coming in...hmm.. Oh I know... The Dealerships have to RE-STOCK!

So guess what??   We are going to have a September RE-STOCKING  Bull Run for all Auto companys.

Those predicting DOOM and GLOOM for September when Cash for Clunkers is gone are forgetting
about RE-STOCKING of INVENTORY.  That could take the whole month or longer to do!

It could take ALL of the rest of this year for Dealerships to start RE-STOCKING their inventories...

We could have on our hands an Inventory Restocking Rally straight through for MONTHs!!!

Ultimately, it is about how long it takes these Dealerships to get their Rebate Money from the FEDs and in what condition they are after taking care of their Payroll and Expenses.

Dealerships have to start RE-STOCKING for January 2010 starting in September.  Because of this we can no longer Trade (F) Ford based on what we think happens in Q3 or Q4.  We are now trading on it based on what happens in 2010.  September through December sales are going to be very meaningless as RE-STOCKING offsets any Month to Month dips in sales.

Wall Street won't really care then... about anything except Next Year. 

Will Next Year be better than this year was?   You don't sell-off (F) Ford in anticipation of a miserable Q1 2010 until February 1st or whenever it is we get January's Sales Numbers.

So there's no reason here NOT to still be a buyer of FORD... Not until February!

11 Comments – Post Your Own

#1) On August 24, 2009 at 4:33 PM, Varchild2008 (85.27) wrote:

Clarification time:

When I said Smart money buys it after... I am of course referring to the fact (F) is up in the after hours market.  Albeit just slightly.

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#2) On August 24, 2009 at 5:06 PM, rexlove (99.43) wrote:

An even better buy is the Ford preferred. Although Ford suspended the dividend on this - they are only allowed to suspend for 5 years - after that they have to pay back all those years of suspended dividends. If you think Ford will still be around 5 years from now - stock up on the Ford Prefferred's - symbol F-S on google. It has one sweet dividend.

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#3) On August 24, 2009 at 5:27 PM, Varchild2008 (85.27) wrote:

Or I can wait for the Dividend to return and then switch to the preferreds.

However, by the time FORD brings back the preferred dividend they may also decide to bring back the Common Stock dividend they had as early as 2006.  Therefore making it premature at this point to speculate better performance out of F-S versus the common stock.

Plus, I am not sure how flexible the preferred is.  I use Scottrade and I can not even call up the Preferred.  I would have to place a phone call or visit my bank.

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#4) On August 24, 2009 at 5:32 PM, Varchild2008 (85.27) wrote:

Oh and if you think I'm posting this out of frustration over the share price falling... That's not my intent...

I have a *BIG* profit riding on this stock.  I bought into it at a 5 handle twice....  I have now worries if it dips to 6.XX even. 

Since I have the patience to wait out DPS dipping from $26 to $11.83.... I can certainly have the patience to hold a stock that is already profitable for me.

I am just make sure that I am *reading* the sell off correctly here.  I think I am.  I think (F) Ford will reverse much of this sell-off by the end of this month.   We may get a spike to $9.XX by the end of this year even.

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#5) On August 24, 2009 at 5:48 PM, jason2713 (< 20) wrote:

Restocking does play a roll, but I bet those cars will sit on those lots for quite some time, so their restocking orders won't be very large. They will definitely play this conservatively.

Ford was my pick as well when it was at the $2/share mark.  I didn't like the auto industry though, just didn't seem like a good sector to be in, I'm now kicking myself because Ford was definitely the one I would have went into out of all the automotive stocks.

 

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#6) On August 24, 2009 at 7:12 PM, devoish (98.38) wrote:

Not me my friend,

Ford has plans to rid itself of 1500 dealerships. GM and Xler had to go bankrupt to do it cheaply. Ford cannot because the Ford family will not surrender control to bankruptcy. They will not be able to rid themselves of legacy issues as cheaply as bankruptcy afforded their competition either.

With 150bil in debt They will be paying interest expenses for a long time. The nice cars will help, but there is not much profit margin in a Focus.

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#7) On August 24, 2009 at 8:29 PM, cbwang888 (25.97) wrote:

Don't count on the man-made rain to make the drought go away ...

Cash for the clunkers is just using environment as an excuse. It is just giving taxpayer's money away. Yes, it saves some jobs for the moment, but it is not solving the fundamental problem...

 

 

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#8) On August 24, 2009 at 8:31 PM, Varchild2008 (85.27) wrote:

Ford does not have anywhere close to $150 billion worth of debt.

Their debt is in the 20s..... that's it...20s.... And they carry almost the same amount in CASH as Debt.  Just off by around $5 Billion.

On top of that we have a recent survey in Michigan and perhaps it also includes Ohio showing that overwhelmingly MEN and WOMEN consider FORD as the most likely to succeed.

www.rasmussenreports.com

This stock isn't speculative anymore.  It is just plain a slow growth stock right now.  Everyone expecting *GOLD* in 2010 are the ones selling off their shares right now.

Those of us who would be happy with slight to moderate year over year gains in 2010 vs. 2009 are optimistic we will get that and will be happy when we do.

Until C.E.O. Alan Mullaly says otherwise... Ford is going to be profitable 2011...if not sooner.

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#9) On August 24, 2009 at 10:19 PM, devoish (98.38) wrote:

Total Long Term Debt 156,793    152,577    145,586   133,066

                Total Debt 156,793   152,577    145,586    133,066

Amounts displayed in millions, last 4 quarters.

I checked end of year earlier... $152,577

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#10) On August 24, 2009 at 10:24 PM, OldEnglish (28.11) wrote:

My survey of 1999 Texans says that Enron is a sound company with a bright future. Come on Varchild, this isn't up to your normal work. Who cares what the masses in a Michigan survey think? They also think living in Michigan is a good idea. Probably Detroit, aka Ground Zero.

Ford's US competitors have burned off their legacy debt. Relative to its competitors, Ford is carrying an enormous burden.  In the long term, bankruptcy is the only solution.

Common Stock Equity of negative 17 billion. 

"Ford is going to be profitable in ____ (Add current year plus 2 ad infinitum)." Wagner said the same thing about GM right up to the bankruptcy. What is Mullaly basing his fairy tale on? The rise in newly issued Heloc loans?

I'm sorry but Ford is finished within 7 years. But hey, as a short term trade, knock yourself out.

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#11) On August 24, 2009 at 10:53 PM, millionby24 (< 20) wrote:

Ford goin to 6. You just wait. Why not sell half, buy in when it goes lower? Are you one of those guys that just holds forever and is satisfied with a 2% gain in a month

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