Monday, May 30, 2011

Ford - 6.1%

And now we come to what was in my eyes, the easiest investment opportunity I've ever had.  The year was 2008.  Panicked by the collapse of mortgage backed securities, Lehman Brothers, and the financial sector in general, America and all the savvy analysts that claimed "housing prices always go up!" were now claiming "The auto industry will go bankrupt!"  GM, Chrysler, and Ford were all given negative stars by rating agencies and investors everywhere were shedding everything they own "to stop the bleeding."

Now, anyone with 15 spare minutes could have learned that GM and Chrysler were far worse off than Ford and thus Ford would be the last to fall.  They also would have known that Ford had just sold Jaguar and thus had "cash on hand" that would allow them to avoid a Government bailout and all the accompanying attached strings.  At $1.56 a share I bought what I could.  At $2.12 a share I bought some more.  Ford continued up and up and up and now is in the $15+ range netting me a more than 800% return.  Now, in retrospect, I am of course kicking myself for not buying more.  Had I put as much into Ford as I had into Under Armour, I'd be quite a bit richer now.  The lesson here is "trust your instincts" as even though I was confident and pulled the trigger, I still had those nagging doubts based on the collective thoughts of others.  Additionally, I feared Big O's takeover of GM would lead to the US Government passing legislation favorable to GM and unfavorable to Ford (sound paranoid?  AIG which owed Goldman Sachs 20 billion was bailed out.  Lehmen Brothers, Goldman's competition, was not).  However, I learn to not regret what might have been and try instead to learn from all these previous experiences, be thankful that I bought when I did (I think $1.56 was the absolute lowest Ford went), and pat myself on the back again for another good pick.

Ford still has room to grow and appears to still be on an uptick.  Their very savvy CEO Alan Mullany is the poster boy for why CEOs deserve their compensation and the company has used the "financial crisis" to hasten their new business model which is slimmer and sleaker than the "Ford Excursion" days.  Obviously, the vast amount of their growth is behind them but it is still mildly undervalued and I plan on holding until they offer a dividend or until Mullany leaves.  $17 is a good short term price for Ford and I see no reason for it not to go even higher.

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