Were You Surprised By The FORD News?
The Dynamic Wealth Report
November 3, 2009
Every once in a while, the market surprises people. It doesn’t happen
very often, but when it does… the results are jaw dropping. Yesterday
was a day like that. The big news was all about Ford
(F).
The company reported quarterly earnings. To say they SHOCKED the Street
would be an understatement. However, one person wasn’t surprised by the
news… but more on that later.
What did Ford do?
They surprised everyone by announcing third quarter earnings of $1
billion.
Then they went on to say they’d be solidly profitable in 2011.
I dug a bit deeper into their numbers and I liked what I saw. Ford’s
been cutting costs and capturing more market share… 2.2% more to be
exact. And the “Cash for Clunkers” program helped overall sales. They’re
raising prices (mainly by removing incentives), and material costs are
lower.
Ford made just under $1.0 billion… about $0.26 per share. Not bad
considering analysts were expecting a 12 cent loss. Talk about an upside
surprise!
Even Ford’s cash position is improving. The CFO indicated they took in
more than $1.3 billion in cash this quarter… better than the $1.0
billion cash outflow last quarter.
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This is a huge about-face from last year. In 2008, it wasn’t looking
good for the company. They had lost $14 billion.
That’s all changing now.
Ford’s managed to avoid both a government bailout and bankruptcy court. And now it looks like they are on the right track for significantly
improved business results.
Clearly the turnaround for Ford happened more quickly than anyone
expected.
Everyone seems to be surprised, but I’m not.
On March 20th, I published an article all about Ford… “Are You Crazy To
Buy Ford’s Stock Right Now?”
I noted a bunch of things helping improve the company’s performance.
First, they were restructuring debt. Trading debt for stock is always a
great way to cut costs. Second, the unions had agreed to a wage and
benefit freeze. And third, I noted they were poised to benefit as other
car companies entered bankruptcy.
I said bankruptcy would hurt the sales of the other automotive
companies and help Ford sales… and it did.
I told people to buy Ford when it was trading at $2.50 a share. Just
look how it’s performed.

The stock soared to a new 52-week high of nearly $9.00 a share in
August. Now it’s trading between $7.00 and $8.00. Since I recommended
it,
this little lottery ticket’s returned over 180% in just a few
months.
So does this mean we should rush right out and load up on the stock? Not
so fast. The easy money’s already been made. Now, the company needs to
execute in a tougher environment. No more Cash for Clunkers. No more
debt exchanges. No more help from the unions.
Yep. You heard that right.
Union workers recently rejected a new work agreement. The fear of Ford
folding is gone. Now it’s back to business as usual with the unions.
It’s not a good sign.
It just goes to show you how difficult the car industry is. If you were
fortunate enough to record a big winner with Ford, now’s the time to
take your money off the table. While the stock should head higher over
the next few years if they avoid a union strike,
I just don’t see it
climbing more than a few points.
There are many other better places to put your hard earned money. As a
long term investment, Ford is not the stock you want to hold.
AGA Medical (AGAM) priced their IPO last week selling more than 13
million shares for $14.50 each. However, the medical company has been
unable to hold on to its lofty price, falling below $13.50 a share just
a few days later. Not a good sign for the overall IPO market.
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