By on June 30, 2010

It’s safe to buy Ford again. Ford as in the F share. After trading at close to $15 in April, it could be had below $10 yesterday. A bargain. Or so it seems.

As we all know, Ford does pretty well selling cars, but without the help of D.C. sugar daddies, their balance sheet is a mess. Ford ended the first quarter with a debt of $34.3 billion. The market was worried that Ford would issue additional shares to pay off that debt, which would seriously dilute current stockholders. So the stock pushed the “Down” button.

In April, Ford paid off $3b in debt, which provided the lift to $14.57. Then, with new payments looming, the share went South again. Today, Ford wiped another $4 billion in debt off its overloaded balance sheet, reports Reuters. Today’s move will save more than $470 million in annual interest payments, Ford said. Their debt load is now down to $27b. Ford has forecast a solid profit for 2010.

According to the New York Times, “Ford’s debt load has been analysts’ biggest concern about the automaker, which has been profitable for four consecutive quarters and projects positive cash flow this year. The announcement suggests that Ford will report strong results for the second quarter, which ends Wednesday.” Buy Ford before someone else does.

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8 Comments on “F Word O.K. Again...”


  • avatar
    rmwill

    FORD SUCKS!

    There… I said it first.

  • avatar
    twotone

    F was a bargain in November 2008 when it was trading just over a buck a share.

    Twotone

    • 0 avatar
      don1967

      Exactly. I’d be less excited by Ford’s recent debt reduction and 30% price pullback, and more concerned about Ford’s popularity and the recent 400% gain.

      I’d also want to know P/E, P/B, free cash flow, and other vital signs before deciding if it is a bargain. Buy the math, not the headlines.

  • avatar
    John Horner

    If Ford can keep paying down its debts at a rate of over a billion bucks a month it will do just fine.

    Also, we should take a moment to note that this might be the first time in history a TTAC blog posting has recommended buying Ford stock. A moment of silence please, the Ford Death Watch seems to be over :).

  • avatar
    ivyinvestor

    The common shares dropped from $15 to $10 and the company’s a bargain? Hardly.

    The thought process that champions “a $5 equity is cheaper than a $50 equity” is a fallacy that led to folks’ investment “accounts” being smashed during the downturn. It’s from the same line of thought as “I’ll spend an hour online looking for a TV for $50 cheaper but won’t spend an hour or two a week on my retirement account because I don’t understand it.”

    And while I concede that buying Ford in the $1-$2 range was ultimately a good call because of risk-laden capital appreciation, it was most assuredly not a *bargain* at those prices.

    • 0 avatar

      You don’t need to concede anything.

      If you are incapable of seeing, -Even in Hindsight-, it was basically an option contract at that price with a Perfect Storm of opportunity consisting of a 3-sided market crash already in the books, GM + Chrysler competition largely MIA in the near term future due to C11 and Cash-For-Clunkers windfall straight ahead, just cash it in and send all your money to Vanguard right now.

      +++Nowhere did Bertel recommend penny/OTCBB-caliber stocks on an absolute $dollar Affordability basis irrespective of quality; I’m sure re:F he was at least implying P/E or PEG.

      .
      —–
      Anyway:
      For me, the run past $7-ish to $12+ for F in ’09-’10 looks like 2 things:
      1) George Soros getting in around Oct-Nov? ’09, post-C4C.
      2) The Post-Crash Nov-Apr Rally

      .
      @Don1967: Word.

  • avatar

    So in three months, Ford has whacked $7 billion out of its $34.3 billion debt. That’s a reduction of their debt by more than 20%. Now that they’ve righted Ford’s ship in terms of product, it’s clear that Mullaly & Co. understand how critical it is for Ford to reduce the debt that allowed them to survive restructuring and carmageddon.

    $7 billion is a lot of debt to pay off in only 3 months. I suspect that as long as Ford keeps making money they’ll be trying to reduce that debt down to normal and healthy levels as quickly as they can.


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