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Last week the Money Map team got together at the Baltimore Marriott and had a two-day conclave to discuss the market and what we can do to better serve you. We had many productive exchanges about our market views, preferred ways to profit, and other important issues.
Keith Fitz-Gerald, Martin Hutchinson and Shah Gilani all had terrific ideas that I am sure you will be reading about here in Money Morning, as well as in their trading services and in the Money Map Report.
But ultimately, we all see opportunities to make very good money out there.
I saved this one for you: Ford Motor Co. (NYSE: F).
Keith Fitz-Gerald, Martin Hutchinson and Shah Gilani all had terrific ideas that I am sure you will be reading about here in Money Morning, as well as in their trading services and in the Money Map Report.
But ultimately, we all see opportunities to make very good money out there.
I saved this one for you: Ford Motor Co. (NYSE: F).
After originally telling readers to buy Ford stock on July 28, 2008, I reiterated my recommendation in January of this year. My recommendation was to buy an initial position in Ford and then build it up over time, taking advantage of any corrections. I sure hope you followed my advice.
Ford's stock corrected a bit immediately after the recommendation and then proceeded to appreciate moderately. It is up slightly more than 11% since my Jan. 19 recommendation, and the rate of climb is about to get even better. Let me tell you why.
For starters, everything I wrote in January is still valid. The restructured and rejuvenated Ford has a superior line-up, with superior quality and it's gaining market share. This is key in an industry that is highly dependent on economies of scale.
"The wave of new Ford product adoption by a cost-conscious, greener U.S. consumer has only just begun," I wrote in January. "Ford Fusion and Mercury Milan already beat the Toyota Motor Corp.'s (NYSE ADR: TM)Camry and Honda Motor Co.'s (NYSE ADR: HMC) Accord in reliability last year, and consumers are starting to notice. Once these trends start, they become enduring."
Since then, the U.S. consumer has noticed the big increase in quality and it's adopted Ford's products on that basis. The public also noticed the decline in quality at the company's foreign competitors. Toyota's recent troubles have dominated the headlines, but some other car manufacturers have been forced to implement product recalls, as well.
Many analysts say that the rally in Ford's stock price has already discounted much of the upside, and much of the market remains skeptical of Ford's high level of debt. But nobody is factoring in major market share gains that are already occurring.
Only now are analysts waking up to the fact that this company is fast on the mend. So let's address the main objection: the very high level of debt.
Back in October of 2000, when I was heading the global credit function at a major asset manager - which invested many billions of dollars in bonds - I looked at Ford, General Motors Corp. and Chrysler LLC from the approved list. They were technically bankrupt back then and they were not doing anything of substance to improve their cost functions in order to get out of the hole. It took eight years and the government-assisted bankruptcy of two of the Big Three to elicit the labor concessions and other restructuring that would allow them to compete on an equal plane with the foreign car manufacturers.
And, for the record, the U.S. car industry is very capable not only of matching foreign carmakers, but beating them handily. Back in 1987, I saw how efficient inventory management was at GM. All of the U.S. carmakers use state-of-the-art assembly lines and inventory management processes. And Ford is implementing Ford One, an initiative to reduce platforms, become even more efficient, and contribute $2.7 billion a year in savings to the bottom line.
Ford was already profitable in the last quarter. In fact, if you take a quick look at the company's balance sheet, you'll see it had a $10 billion positive swing in net tangible assets in the last fiscal year. This trend is going to continue, propelled by Ford's market share gains and expanding profit margins. With a healthy pile of cash, another $2 billion from the sale of Volvo, and no meaningful debt maturities for a couple of years, Ford's debt problem looks much more manageable.
Additionally, February sales showed a great positive surprise - Ford beat GM in sales for the first time since 1989. And the company is launching a slew of impressive new products - the Fiesta, Focus, Explorer and Super Duty - to keep that momentum going.
The market is a lot better than analysts believe: Even with the Northeastern United States clobbered by a two brutal blizzards in February, sales outdid expectations. And new Ford products are working well: Fusion hybrid and Transit Connect were awarded North American new car and truck of the year.
Again, once a consumer trend is established, it is very difficult to reverse. So I expect Ford to continue gaining market share momentum. I also expect to see car sales beating analysts' expectations. And this will have a fantastic effect on profit growth, because of the company's very high operational and financial leverage.
In fact, investing in a turnaround company is one of the easiest ways to make a fortune. As profits accelerates, so too will the stock as it races to catch up in order to maintain the multiple. The multiple then expands in recognition of accelerating profits. It is the sweet spot of investing. And this turnaround is one that is happening right before our eyes.
So take advantage of these changes by jumping onto Ford if you have not done so already.
Recommendation: Buy Ford Motor Co. (NYSE: F) at market (**).
(**) - Special Note of Disclosure: Horacio Marquez holds no interest in Ford Motor Co.
News and Related Story Links:
Ford's stock corrected a bit immediately after the recommendation and then proceeded to appreciate moderately. It is up slightly more than 11% since my Jan. 19 recommendation, and the rate of climb is about to get even better. Let me tell you why.
For starters, everything I wrote in January is still valid. The restructured and rejuvenated Ford has a superior line-up, with superior quality and it's gaining market share. This is key in an industry that is highly dependent on economies of scale.
"The wave of new Ford product adoption by a cost-conscious, greener U.S. consumer has only just begun," I wrote in January. "Ford Fusion and Mercury Milan already beat the Toyota Motor Corp.'s (NYSE ADR: TM)Camry and Honda Motor Co.'s (NYSE ADR: HMC) Accord in reliability last year, and consumers are starting to notice. Once these trends start, they become enduring."
Since then, the U.S. consumer has noticed the big increase in quality and it's adopted Ford's products on that basis. The public also noticed the decline in quality at the company's foreign competitors. Toyota's recent troubles have dominated the headlines, but some other car manufacturers have been forced to implement product recalls, as well.
Many analysts say that the rally in Ford's stock price has already discounted much of the upside, and much of the market remains skeptical of Ford's high level of debt. But nobody is factoring in major market share gains that are already occurring.
Only now are analysts waking up to the fact that this company is fast on the mend. So let's address the main objection: the very high level of debt.
Back in October of 2000, when I was heading the global credit function at a major asset manager - which invested many billions of dollars in bonds - I looked at Ford, General Motors Corp. and Chrysler LLC from the approved list. They were technically bankrupt back then and they were not doing anything of substance to improve their cost functions in order to get out of the hole. It took eight years and the government-assisted bankruptcy of two of the Big Three to elicit the labor concessions and other restructuring that would allow them to compete on an equal plane with the foreign car manufacturers.
And, for the record, the U.S. car industry is very capable not only of matching foreign carmakers, but beating them handily. Back in 1987, I saw how efficient inventory management was at GM. All of the U.S. carmakers use state-of-the-art assembly lines and inventory management processes. And Ford is implementing Ford One, an initiative to reduce platforms, become even more efficient, and contribute $2.7 billion a year in savings to the bottom line.
Ford was already profitable in the last quarter. In fact, if you take a quick look at the company's balance sheet, you'll see it had a $10 billion positive swing in net tangible assets in the last fiscal year. This trend is going to continue, propelled by Ford's market share gains and expanding profit margins. With a healthy pile of cash, another $2 billion from the sale of Volvo, and no meaningful debt maturities for a couple of years, Ford's debt problem looks much more manageable.
Additionally, February sales showed a great positive surprise - Ford beat GM in sales for the first time since 1989. And the company is launching a slew of impressive new products - the Fiesta, Focus, Explorer and Super Duty - to keep that momentum going.
The market is a lot better than analysts believe: Even with the Northeastern United States clobbered by a two brutal blizzards in February, sales outdid expectations. And new Ford products are working well: Fusion hybrid and Transit Connect were awarded North American new car and truck of the year.
Again, once a consumer trend is established, it is very difficult to reverse. So I expect Ford to continue gaining market share momentum. I also expect to see car sales beating analysts' expectations. And this will have a fantastic effect on profit growth, because of the company's very high operational and financial leverage.
In fact, investing in a turnaround company is one of the easiest ways to make a fortune. As profits accelerates, so too will the stock as it races to catch up in order to maintain the multiple. The multiple then expands in recognition of accelerating profits. It is the sweet spot of investing. And this turnaround is one that is happening right before our eyes.
So take advantage of these changes by jumping onto Ford if you have not done so already.
Recommendation: Buy Ford Motor Co. (NYSE: F) at market (**).
(**) - Special Note of Disclosure: Horacio Marquez holds no interest in Ford Motor Co.
News and Related Story Links:
- Money Morning:
Buy, Sell or Hold: Ford Motor Co.'s (NYSE: F) Turnaround Could Put Investors on the Fast Track to Profit
- Money Morning:
Buy, Sell or Hold: Ford Motor Co. - Money Morning:
GM and Ford Burning Cash, Seek Emergency Government Loans
- Money Morning:
GM, Ford, and Chrysler Chiefs Push for Action in Washington as Congress Debates Another Bailout - Money Morning:
GM, Ford Antsy to Unload Saab and Volvo Sale
- Money Morning:
Ford Inches Closer to Volvo Sale, Profitability - Money Morning:
Ford Says "No Bailout Funds" Despite Worst Loss Ever
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Tags: Auto Industry, Cars, Chrysler, Consumer Confidence, Ford, Honda, Toyota
I completely agree with your article. Great job! I bought NYSE: F at 1.85 back in 12/08 and I am NOT letting it go until fruition. I'm still on the fence about what and when that is but I'm clearly in a good position with the capital gains tax, could sell it and go buy stuff or re-invest! That would be LUNACY!
I've seen reports like "SELL IT" and "NOT ALL ROSY FOR FORD" and I laugh! They all suggest to sell the stock and in my opinion that's a moronic move! If I had 100 million dollars I'd put 100 million dollars into Ford. Then when it was up, I'd buy more on margin! That's how confident I am in this stock!
That's actually what I did on a much lower scale!
And hey, anyone reading this, I do NOT usually post on news comments online. I reserve my enthusiasm for Car forums and tech forums where we chat about the forum topics. But I'm telling ya… I've read so much about the auto industry, seen so much happening, know of everything coming (its all public knowledge) and it's a VERY clear picture of things to come. If I was a pro, I'd say "Buy today and you'll have 17.50 a share by Halloween" and then you could buy one heck of a costume! Maybe of Henry Ford? lol
Good luck everyone! And um, this stock is not luck, it's a no brainer! BUY IT, KEEP IT
I recently was in Asheville Mall and noticed a car with some very nice styling. I thought it
was a new model of a foreign car maker. Upon walking around I saw the Ford emblim.It was
a Ford Taurus. Consumer Rports very high marks ,equal or greater than most of the previous
foreign marks.
Lets not forget that we are buying the smartest Chief Exec.Officer Alan Mulally.That stream lined
BA in it's worst times. It is hard to beleive W Clay Ford jr was able to pull him from BA in 2006 to regorganize F, he didn't come cheap!!! The driving force of turn around F. Best regards alb
–84 yr old Ford options trader. I bot $90 puts on TM and bot $7 calls in F at the first TM recall— coverd tm at 74 drop–Still have the June 7$ im calls
I bought F when it was 11.60 and sold at 12.70. How far do you think it will move in the next one month
Talk about long term buy and hold, I have owned my father's F stock since inheriting it in 1966.
I periodically added a little to it but am overall down in my investment.
I'm glad to see it might come back.
I'm just an avereage person with average money. Back when Ford was a $-somthing I bought 2300 shares. Wish I had bought more. I felt the namesake Ford Logo emblem was worth that. However, back when I tried that with K-Mart and lost. Anyway I'm with you on this one. Thanks
Have ford and ford perfered. What do u think will happen to the perrferred due -1 15 32 callable 1 15 07
What is the price target for Ford?
Have large investment in F, I think 20.00 is near,
Ford has taken their eye off the ball before. They implemented Deminq Statistical Quality Control in the
late 80's; brought out the Taurus, restyled Thunderbird, made a commitment to quality, demanding the
same from vendors. They found consumers were willing to work with them as were the workers on the
line.
In 1995 I tried the program, buying a Mercury Mystique in the first year of production. Great car in
Europe – the Mondeo, but the U.S. implementation failed big time. Ford did the Contour version.
They'd gone into acqusitions and forgot about systemic quality. I've driven a Fusion rental, but it won't be
for a decade that I'd even buy one.
Toyota has proven "too big is failure." Corporate minds just get impervious to news they'd rather not hear.
Hide behind some lawyers. Don't let the customers know they are really crash-test dummies. Anything
put on the lot, or on a shelf, can present some risk to the customer.
No doubt some money can be made on the change in sentiment, but will Ford or any corporate
organization be capable of delivering what the public wants and can afford to pay for the long term.
Owning a vehicle is a capital investment. It should have some functional use after its paid for, even if
accounting depreciates it in three years.
Today, manufacturers should be building a 300,000 mile car with modular/upgradeable electronics. In
the 1980's the Japanese were building a 100,000 mile car as opposed to the 30,000 mile car Detroit built
1950-70. After three years of 10,000 miles – repair bills started to kick in. If the style change didn't make
you buy, the mechanical problems had you worried, so if you had the cash flow to do it, you bought
something new.
The car was sold as a sex toy. It really is just something that assists in personal transportation, like shoes
or a bicycle.
Primarily used to transport only a single person, the passenger must double as the driver. This creates
some conflict and safety issues, more so since the cell phone and now texting. The brain would rather
communicate than navigate. So a brain engaged in communication can't pay full attention to the machine it
is also supposed to be driving.
Not a problem on a bus, train or plane – they have designated drivers who shouldn't be texting either.
The U.S. suburban design post WW-II was to help survive nuclear attack. If we were spread out, somet
would survive.
This has led to a mis-allocation of capital in the U.S. for automobiles and housing, and the extra
infrastructure to serve a spread out population.
That these activities are not all that productive is evidenced by the fact that they have had to be funded
with consumer debt more and more over the years.
First people were upside-down in auto loans, then homes. Credit cards get you to upside-down after a few
months of paying the minimum until you carrying a balance of over $3000. From then on, you are a debt
slave.
Just like the it only takes a few cigarettes to become addicted, debt gets us. This is all against the best
advice of our elders – unless they are the models for our debt, and other addictions.
Rehab is hell. Deniers avoid it. Can we make a buck understanding the dysfunction in which we operate?
Buy F?
We are on a roller coaster now and if we don't get rid of Obama it won't make any difference what stock you have. His agenda is to ruin this country no matter what he tells you. He is a
pathilogical liar, has already broken many laws of our country. Where are the keepers of the laws-FBI, attorney generals, etc?? The entire bunch in DC are all corrupt. Might as well buy Ford as any other stock, it's all rigged.
many subjective statements like that " everything is rigged", sound like what the status quo use to continue making money without change. CONSIDER THE SOURCE the tea baggers are all just puppets being paid by the big money lobbies to continue arguing instead of change. they hand out fliers to start fights in town hall meetings to prevent real debate.
Ford is a dream stock. Bought 75 call options at 0.93 iin late fall of 2009 and sold them at over $5.80 for a tidy sum of 43,500.00…..Rebought 20 options recently and they are already up over $3000.00 in less than a month. This one will double in my opionion in the next 6 mths.
Jump on board its a upward ride.
Drive around in Florida, see all the NEW cars mostly the more expensive ones, At a red light see 4 out of 5 cars are new and foriegn, to one US Ford, GM or Chrysler. What a shame. I think it shows a person, if you are working or making big money, you can afford a Florida vacation and a new car. By the way, the American cars you see, are older models, What a shame. Yes, I was born and raised in DETROIT>