Monday, January 12, 2015

Ford Shows Off Today At The NAIAS

Beautiful. Jaw-dropping.  State of the art.  Hot.  These were some of words that were used today to describe Ford vehicles at the North American International Auto Show in Detroit.  Aside from the photos of the trio of vehicles (the GT supercar, the F-150 Raptor, and the Shelby GT350R Mustang) in the new Ford line-up getting the most attention, I made some investor notes to consider for all of you.

First, there were at least 25 headlines for Ford today on Yahoo.  See the list here: 25 Articles With Ford Cited.

There were at least 13 different sites writing about Ford today.  Some of these included Forbes, Bloomberg, Business Insider, CNBC, USAToday, and so on.

And now let all of this hoopla be a lesson to you newbie investors.  Headlines matter.  Headlines don't matter.  Headlines can get an asset to tank within seconds.  Headlines can get an asset to sprout wings like Red Bull.  And sometimes, headlines can have a net neutral response from sellers and buyers in the market.

1 cent.  That was the difference between Ford's share price on Friday and Ford's share price today.  If you own Ford stock, you may be scratching your head right now.  How can it be?  Ford dominated Twitter.  Ford dominated financial media.  Why were there as many buyers as there were sellers of Ford on this day?

Here's my take.

Macro Explanation

Oil.  Oil fell once again.  Crude punched out at $45.71 a barrel, down 5.48%.  But Oil has been falling for some time now, and this wasn't unexpected.  However, it worries investors that there is something big and bad looming, like the start of deflation in the U.S. or the loss of an entire new industry like fracking.  Add the potential bankruptcy of small to mid-size oil exploration and drilling outfits, the loss of jobs associated with these bankruptcies, and you have a rain cloud the size of Texas on the horizon.

The flight to safety.  Well, despite my rants about the U.S. Treasury ironically being the safe bet for money, see: The-us-safe-haven-for-money-ironic, the flight to safety play was on again.  There were more buyers than sellers of the U.S. Treasury, bidding prices higher and consequently causing the yield to fall to 1.912%.  An almost 3% drop from last Friday.

The overall market.  Well, overall, we lost 96 Dow points and 16 S & P points.  So there was downward pressure on all equities today.

The Stock

I blogged about Ford twice last year.  Here is a link to the latest entry: yahoo-and-ford-two-stocks-delivering.  On December, 10th, I even suggested you buy Ford shares if all you had was $500 to invest: $500-investing-suggestions-better-than.  So you know I'm a long term investor of Ford with a well-researched and thought-out thesis.  Last week gave Ford investors a huge opportunity.  The stock was selling in the mid-$14's.  I hope you bought more shares!

But back to why investors didn't get hooked by the news coming out of Detroit today.  Remember that several days ago, Ford reported December sales.  They were up year-over-year, but missed estimates.  Analyst were expecting a 3% increase in sales.  A 1% increase was reported.

Earnings.  Ford reports earnings on the 29th of this month.  Many investors have been advised by the talking heads to wait until the earnings report to get conviction on a trade.  It is safer to wait until the report to see if the company is positioned where it needs to be.  One problem with that:  You are not faster than the machines.  When earnings are reported, the stock reacts almost immediately, either up, if the stock met top and bottom line expectations, if margins didn't contract, and guidance by the CEO was positive OR down if any of the the previous were bad.  There are variations and combinations of news during an earnings report that can have positive, negative, or neutral effects as well.  It's not bad advice to wait until the earnings come out.  However, you will have a Homer Simpson moment if the stock pops to the upside and you were hoping to start a position on a stock.

Don't fret.  Even if Ford has an excellent quarter, I don't see the stock rising more than $1 to $1.50.  Therefore, you can get in at a reasonable price still.  I'm convinced the stock will fetch $22 within the next 2 years.  If not sooner.  I'm willing to wait now more than ever.  Why?

Ford raised its first quarter dividend by 20%!  Owners of the stock (ex-dividend date is Jan. 30th) will get paid 15 cents per share in March.

Be Patient

An investor's worst enemy is him or herself.  If patience is not one of your virtues, then you should go into day trading.  Investing in equities, i.e., holding onto them longer than a few months, is not for you. Ford is on track to deliver on its promises.  You got a good look at what the future holds for Ford today and it looks freakin' awesome!  The numbers will come in.  You just have to be willing to wait.

Thanks for Reading!  @COsvaGomez.  Like this Blog?  Tell others about it.

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