Sunday, November 16, 2014

Yahoo and Ford: Two Stocks Delivering Surprises

On 9/20/14 I made quick mockery of the aggressive nature of sellers of Yahoo stock.  See Yahoo's a Treasure Chest and a Buy.  If you recall, this is when (the day before actually) Alibaba (BABA) became public.  All of the BABA players who couldn't own BABA until this day, cashed out their YHOO positions in the morning (near the stock's high) and became BABA investors.  The trade for these investors has not been a bad one.  BABA as of today (11/14/2014) is getting bids in the $115 range.  Many of these investors most likely purchased BABA (on this day) in the mid to high $90's, where it was trading.  So that's a great read if they've held or added to their stake.  I'm glad it worked out well for them.

But what of Yahoo investors who did not sell any of their position on 9/19/2014, despite seeing a 4 point drop in share value?  If they had read my post, they may have had more conviction to ride out the volatility, and better yet, add to their position during the days the stock traded under $40!  This is how fortunes are made.  You, the long term holder, buy more of an injured stock (not an injured company) when sellers (traders) lose interest and move on.  There was nothing wrong with Yahoo! That's why I called it a "treasure chest."  If you capitulated under the pressure of the herd, you may not want to continue reading.  Yahoo is currently trading in the high $51 range.  People, that's a 13 point swing if you bought YHOO at $38 in September.  Congratulations if you did.  Where is the stock going?  This is the big question now.  I believe there is more upside left.  This is what I wrote in the linked post above about the prospects for Yahoo:

"On Barron's magazine this weekend, "Best Way to Play Alibaba: Buy Yahoo!", Barron's estimated Yahoo's assets to be worth 58 billion, translating to $58/share.  This does not include taxes.  Nonetheless, there is a wide margin of safety there for investors.  Barron's assumes that 12 billion would be shaved off from the overall after taxes, making the shares valued at $46 dollars each.  That's 12.4% upside from where the shares are now!  On Monday, there could be more selling.  If so, this could present a compelling entry point for new YHOO investors.  If it dips again, I'd buy!"--9/20/2014.

Onto Ford (F)

With Ford (F) we have a situation where long term investors must have really believed in the company to have stayed the course.  The stock reached $18.01 on July 24, and then traded between $16.80 and $17.60 (reaching this on 9-2-14).  Investors of F would have hated the month of September, seeing the stock plummet all the way down to $13.54 on October 13th!  Not this investor.  I loved it!  On 8/13/2014 I wrote: My Premise for Ford... and made a compelling argument for Ford stock being a 2015 play, not an end of year 2014 one.  I wrote this:

"They have stopped factory work and this has impacted sales, but this is because they cannot turnover their factories to aluminum vehicle production without actually turning off the machines!  What else was in my premise?  That Ford would improve sales worldwide.  They have more than met this expectation.  Both Europe and China Ford vehicle sales continue to shine and grow healthily.  Finally, my premise for Ford also included that they will execute the game plan for the production of F-150 aluminum bodied vehicles.  The company has not reported any setbacks thus far so unless they are hiding something, one can expect that they are on schedule."

Why did I enjoy seeing Ford stock drop more than four points?  Because I was a buyer and added to my position, lowering my cost basis even further!  Looking at Ford today, 11/14/14, we have the stock finishing the day at $15.14.  The past five days has seen shares of Ford go on a mini rally (on record European sales), rising from a low of $13.98 to $15.14 for a nice 8.3% gain.  And this is what I meant back in August when I talked about making sure that you as an investor have a working premise to stick to on any stock/company investment you make.  Without a premise for a certain expectation of performance, you may have panicked and sold your shares of Ford.  The stock is not back where it was for its 52 week high yet, or a little over $18, but that's okay.  I can't wait for 2015 when the new F-150 Aluminum bodied pick-up is finally sold.  Other new vehicles Ford will put out will also be potential game changers, like the freshly designed Explorer and the Lincoln MKC.  I also feel lower gas prices will help consumers spend more and buy up, in terms of vehicle size, again.  Also consider how GM keeps shooting itself in the foot.  Bodes well for Ford.  I'm sticking with Ford!

Also see: Ford shares could climb 30%

Thanks for reading!  Please share.  Comment/Question?  Please post.  Gracias amigos!  You can follow me on Twitter: @COsvaGomez

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