Anyone buying Ford??

[Nathans_Dad]

I was looking at the carnage in the retirement accounts today and starting looking at how much various Blue Chip companies have fallen...made me feel a little better about my losses I guess.

Anyhow, I looked at Ford and was a little shocked to see it at $1.40 a share. I know about the auto bailout and how bad the US automakers have been doing, but $1.40 a share for Ford??

So, I started wondering if it might not be the time to throw a little "throw away" money at it. I'm not talking anything major, maybe 1000 shares. If I lose it I am out $1400. If the government does what I think it will do and bails out the big three, there could be a fairly easy 5 bagger in it in the next 6 months.

Anyone have any thoughts?

[cel]

I heard that Barney Frank has made a statement that for the Gov. to "bailout" the Big 3 the Gov. would want 80% ownership. In other words the Gov. would take total control of the Big 3.

[HardDrive]

I will be buying some as well. Oddly, I was thinking about 1000 shares as well. I trust Mullaly, and I think Ford has a reasonable focused product line. Their Edge crossover seems to be selling reasonably well, and any uptick in truck buying will be an obvious boost due to the popularity of the F-150.

[strupgolf]

If Ford brings over some of their Europeon cars early, which have gotten great reviews, they might be in a good position to wheather the storm. Not a bad idea at $1.40

[p911dad]

This is a great opportunity at this price. I remind you all of Allied Chemical(Bopal Disaster in India), Corning Inc meltdown in the last tech bubble,etc. All these stocks hit the skids and were down to these levels(I also remind you of Morrison-Knudsen, who ultimately failed) The Allied Chemical and Corning deals would have made you an easy 20K or more for 1000 share at the $1.50 range. So if you are a gambling man, do it. I remind you of an important fact- Allied and Corning are brands, Morrison-Knundsen was really not(engineering company, not a consumer company). Brands very often are kill-proof in the long term. Ford and GM are iconic brands. So, I would say you have a better than 50% chance of really doing well in about 3 or 4 years if you hit it now. This is based on my long personal experience, totally unscientific, in the market. Brands rock. Pick a target price to unload at, say $15. Then do it. Take your profit and be happy. Glenn

[Rot 911]

Unfortunately I thought it was a great buy at $3.00. Oh well.

[allaircooled]

What if Ford goes bankrupt? Would that mean you lose your $1400 investment? Sorry for a possible dumb question but I have never invested in stocks besides mutual funds.

[dennis in se pa]

I was having the same thoughts. At 1.33 in after hours trading. So beat up it just HAS to be a buy!

[Mr.Puff]

Originally Posted by allaircooled

What if Ford goes bankrupt? Would that mean you lose your $1400 investment? Sorry for a possible dumb question but I have never invested in stocks besides mutual funds.

If they go bankrupt there is a possibility of you getting your money back. You are the furthest down on the food chain though .

http://www.sec.gov/investor/pubs/bankrupt.htm

[the]

If you own stock, you can be pretty sure you will get your interest eventually wiped out in a bky.

[dtw]

Also check out their bonds. There are some short term issues that have discounted so deep, they are at 60%+ effective yield. Rated B-. If they go bk, you also are further up the line to get some $ than the common stockholders. I'm probably going to get some stock and some bonds in Ford.

[Nathans_Dad]

From what I understand if Ford declares Chapter 11 the stock would become nearly worthless, however if they emerge from Chapter 11 as a solvent entity the stock still is a share of that entity.

My bet is that the US government will not let Ford go under.

[BGCarrera32]

My 2 cents:

None of these companies are good buys, period. Up until recent the way they were profitable was to build things like the F150 (a very successful product in demand at the time), GM built burbs and Hummers, Chrysler large vehicles and minivans. They made bank on the big stuff and arguably the mid size family cars.

Excessive fuel taxes, restrictive EPA mandates, and wacko government regulations have all but hamstrung these guys into a position to do anything quickly about it. Obviously, they can't build a pickup that gets 40 mpg, so nobody buys.

If the bailout fails to happen, or falls short and does nothing to correct the situation, 1 of these outfits if not all of them will go bankrupt and be reorganized. True, GM and Ford won't cease to exist, but your shares of common stock might.

Go for larger manufacturing firms that have diverse product lines and global presence. Danaher and 3M come to mind.

[Nathans_Dad]

I'm certainly not saying there is no risk here. I would not bet the farm (or even a piece of the farm) on this.

If you look at the three companies, Ford is generally considered to be the best candidate and in the best shape to weather this storm.

To me there are three possible outcomes:

First, Ford simply goes belly up and sells off its assets: Not likely.

Second, Ford makes it through with some sort of bailout from the gov't and does not have to file Chapter 11: If this occurs the stock would likely return to something close to its average over the last 5 years, around $8 per share. That would be about a 550% return from today's levels.

Third, Ford has to declare Chapter 11 either with or without a bailout from the gov't and reorganizes. If that is the case, and you keep your shares throughout the reorganization you should receive shares in the new company. It may not be 1:1 for your shares, but you will get shares. Then you see if Ford can move forward or not.

Again, I'm talking about a pretty small amount of money here, an amount that wouldn't really upset me TOO much if I lost completely.

[BGCarrera32]

2 things though:

1) When there are other large companies doing decently considering the state of economy that are a good buy right now, why fart around with the big 3 and try to decide if bankruptcy>then reorganize blah blah...don't think $1.40 a share will turn into $24 anytime soon.

2) When Mulally was brought in from Boeing by Bill Ford, Mulally clearly stated that a plan was needed with some amount of time (I think he said like 2 years) to turn Ford around, and if it couldn't be done, the decision would be to liquidate the assets to maximize what shareholder value is left, and that's the unfortunate end. Clearly they are close and NOW they are in front of congress with their hands out...

I found it humorous when Mulally was asked by the congressional committee if he's be willing to take a paycut...I would have told the senator "I will work without pay if you will because your return to the US citizens is FAR worse than that of Ford to its shareholders."

The auto execs need to grow some stones. And quick.

[competentone]

Originally Posted by Nathans_Dad

Third, Ford has to declare Chapter 11 either with or without a bailout from the gov't and reorganizes. If that is the case, and you keep your shares throughout the reorganization you should receive shares in the new company. It may not be 1:1 for your shares, but you will get shares.

Most Chapter 11 bankruptcies do not result in the common shareholders getting anything.

Considering their debt, Ford in bankruptcy would leave nothing for the common shareholder.

I've made quite a few "high risk" trades in the past and am not afraid of risk, but am only interested in taking on high risk if there is potential for a high return that justifies the risks.

I see virtually no potential for any high returns by buying Ford; I see a high likelihood of a bankruptcy and complete loss for the common holders.

[the]

Originally Posted by Nathans_Dad

Third, Ford has to declare Chapter 11 either with or without a bailout from the gov't and reorganizes. If that is the case, and you keep your shares throughout the reorganization you should receive shares in the new company. It may not be 1:1 for your shares, but you will get shares.

not true.

you could use your shares as wallpaper, though.

[jyl]

There are good, profitable, companies selling below tangible book now. Example - Alcoa (AA) tangible book $9BN market cap $5BN.

Or, if you want to play small, there's Smith & Wesson (SWHC) at <$2. Market cap just $84MM.

Just ideas, not recommendations.

[jyl]

Or, another idea, would be to look at some of the auto component makers who supply Detroit.

Logic is, Detroit has three outcomes: (1) BK and liquidate. (2) BK and emerge w/ govt help. (3) No BK and survive, w/ or w/out govt help. If you buy F, you only have one chance to win, outcome (3). If outcomes (1) or (2) you are wiped out. If you buy a F supplier, you have two chances to win, either outcome (2) and (3).

Very simplistic I know, but something to think about.

[Z-man]

I'm with Rick on this - it seems the auto industry has been hit hard with the current economic crisis. And for sake of preventing further bloodletting, something has to be done to keep the auto industry afloat. (I have my opinions on what can help **cough do something with UAW cough** but that's for a different thread.)

While there is no guarantee that any of the automakers will survive, it is in this nation's best interest to keep them going. So there is some incentive for the goberment to step in and assist.

Having said that -- anyone have advice on which broker to use? TD Waterhouse? Ameritrade? Are there any non-interweb brokers left I can go to?

Thanks,
-Z-man.