Can a case be made for Ford's shares today? Indeed one can be made, but the stock is not for the squeamish. Ford (NYSE: F) is facing its biggest hurdles ever: a pronounced U.S. recession, intense competition, excess capacity, pressured margins, declining demand for its pickup trucks, and hardly ideal credit market conditions for potential new vehicle purchasers.
That said, CEO Alan Mulally's restructuring/cost-cutting efforts have taken Ford from comatose status to serious-but-guarded condition: it will be up to Ford's engineers and designers to build on that progress. The key? Consistently bringing to market successful, high-quality cars -- cars the American people want. Ford will be able to do that, and this fact, combined with the extraordinary pent-up demand for new cars created by the U.S.'s pronounced recession, will provide a tailwind for Ford starting by Q1 2010, perhaps sooner. The First Call F2009 / F2010 EPS estimates for F are a loss of $2.37 and a loss of 39 cents.
With the above as a backdrop, a tight Stop has been deployed for F, in the event the U.S. economic recovery does not begin by year's end.
Stock Analysis: Ford is a high-risk stock. Consider buying a 25% position in F now; then buy another 25% in three months, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your F position in the first half of 2009. Sell / Stop Loss if you were to buy shares in this company: $3.75.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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