The latest edition of Motor Trend magazine this month notes that Ford Motor Co. (NYSE: F) decided not to take the governments money because the family would have had to forego much of its income under the terms of the plan until they can turn the company around and pay back the loans.They do not want to do that, and although they lost almost $3 billion in the most recent quarter, they are going to try and tough it out. The mags monthly notes comment that Ford is in better shape than General Motors (NYSE: GM) or Chrysler which did take bail out money having about $19 billion of liquidity remaining.
I invested in Ford several years ago during better times and took a loss back then. The intriguing thing about Ford is that the Ford family still has a lot of skin in the game, unlike most major corporations. To me that adds an interesting twist to the investment risk.
The stock closed at $1.87 on Friday and is trading up mid-day to $1.90. This is off considerably from its 52-week high of $8.79. Investing in Ford at this point is a very straightforward proposition. Can the company stay out of bankruptcy or not? It's a bet and the bet is that simple.
You cannot rely on any of the usual metrics. There are no earnings, only losses as far as the eye can see. The return-on-equity is negative 375%. Guessing when the bleeding will end is exactly that, a guess. I do not think Ford will be going out of business, but I have no idea if shareholder value will ultimately be protected. It is hard to 'know" anything given the number of large cap household names that have become part of the economic ruins of the last year.
Several months ago Kirk Kerkorian bailed out of the stock, choosing to take a loss instead of hanging on for better times. So all things considered, I do not think this is the time to make a contrarian move. There are hundreds of downtrodden companies paying dividends that have much brighter stories. Some of them can be found in Chasing Value: 9 picks for 2009 -- APC, GE, ISRG, WFC and more.
The stock may be more appealing to technical analysts or day traders, but that is outside my comfort zone. If you are making the bet in favor of Ford, perhaps you can share some insight others do not see.
Update: Ford closed up a penny to $1.88.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I do not own shares in Ford or GM.
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