Motley Fool: Ford Is The Worst Stock of '09
I reckon it’s a little early to name the worst stock of ’09—given how many choices are bound to surface as the U.S. economy tanks. But, well, there it is: The Motley Fool names Ford (F) the worst stock you can buy. “The trouble with Ford’s stock is that it may be very tempting to some investors who look at the $1.94 price tag and think that it’s a nice, cheap price for a great American car maker. The trap door with Ford is the company’s debt—all $157 billion of it. Looking at Ford on the basis of its total enterprise value (equity value plus net debt), the company is still valued near or above the better-positioned automakers… The dealio at Ford comes down to the fact that debt holders are really the ones who own the company at this point. At the end of the third quarter, the company had a shareholder deficit of nearly $2 billion, which basically means that there are more non-equity claims against assets than there are assets. That’s bad news for shareholders because debt holders have rights and protections that will let them flick away equity holders like a paper football, if push comes to shove.” As our Ken Elias pointed out this morning, as MarketWatch points out tonight, the shove is here.
Can't argue with the financials, but how on earth can the stock of a company likely to succeed be a worse buy than that of GM? BTW, screamin' Jim Cramer had an interesting take on dollar stocks a few weeks ago. Roughly paraphrased: "A $100 stock goes down 50 cents, how much did you lose? A $1.00 stock goes down 50 cents, how much did you lose?"
I'm a fan of the Motley Fool. In fact, I learned about TTAC in a Motley Fool article about GM a few years ago. I haven't read the Ford/Worst Stock of 2009 article, but I know MF looks at stocks as long term investments. Right now, all stocks are "on sale" and, in this economy, the best traits to look for in a business are lots of cash, little debt, recession resistant businesses, non dependence on the availability of consumer credit, and industry leadership. Those are the businesses that will come back strong. Ford does not fit the bill. I would think that GM is worse, though.
I can't see how Ford could be worse than GimMe stock. GimMe (GM) will go BK and that stock will be a total loss. Bunter
The theory is sound, but how is the overall record on MF stock picks? I can't believe there is no site with records on all the touters.