2-Star Stocks Poised to Plunge: Ford?

Based on the aggregated intelligence of 135,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, embattled automaker Ford Motor (NYSE: F  ) has received a distressing two-star ranking.

With that in mind, let's take a closer look at Ford's business and see what CAPS investors are saying about the stock right now.

Ford facts

Headquarters (founded)

Dearborn, Mich. (1903)

Market Cap

$16.92 billion

Industry

Auto Manufacturers

TTM Revenue

$127.76 billion

Management

President/CEO Alan Mulally (since 2006)

CFO Lewis Booth (since 2008)

Compound Annual Revenue Growth (over last five years)

(5.4%)

4-Month Return

246%

Competitors

General Motors

Toyota Motor (NYSE: TM  )

Honda Motor (NYSE: HMC  )

CAPS members bearish on Ford also bearish on

Citigroup (NYSE: C  )

Starbucks (Nasdaq: SBUX  )

CAPS members bullish on Ford also bullish on

General Electric (NYSE: GE  )

Microsoft (Nasdaq: MSFT  )

Sources: Capital IQ, a division of Standard & Poor's, and Motley Fool CAPS. TTM = trailing 12 months.

Over on CAPS, fully 2,504 of the 7,290 members who have rated Ford -- some 34% -- believe the stock will underperform the S&P 500 going forward. These bears include All-Star TSIF, who is ranked in the top 1% of our community, and stabbi.

Just last week, TSIF explains why we haven't been driving a Ford lately: "Ford's cars still suffer from being too big, gas hogs, and costly. American "loyalty" will keep Ford out of bankruptcy, but that "trump" card is weak now that many of the foreign cars are actually built in the US. Ford will continue having union/pension and supplier problems even if the economy picks up."

In a pitch from one week earlier, stabbi also taps the stock as one massive liability:

That enormous debt load will be a dramatic hindrance to profitability. That is the main problem I see with this company: debt upon debt. They will be forced to use credit to pay creditors. They cannot generate sufficient cash flow to cover the debt payments. The only way to pay down their estimated 32B in debt is to offer bonds (more debt) or to offer a massive public offering of shares, thus diluting the value of current shares. Either option is bad for the shareholders.

What do you think about Ford, or any other stock for that matter? Make your voice heard on Motley Fool CAPS today. More than 135,000 investors are waiting to hear what you have to say. CAPS is 100% free, so simply click here to get started.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Starbucks and Microsoft are Motley Fool Stock Advisor selections. Starbucks is also an Inside Value pick, and the Fool owns shares of it. The Fool's disclosure policy always gets a perfect score.


Read/Post Comments (17) | Recommend This Article (23)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 06, 2009, at 10:32 AM, SpartanOLP wrote:

    You say TSIF is an All-Star, but this persons comments are clearly reflect an old view of Ford. " "Ford's cars still suffer from being too big, gas hogs, and costly. American "loyalty" will keep Ford out of bankruptcy, but that "trump" card is weak now that many of the foreign cars are actually built in the US. Ford will continue having union/pension and supplier problems even if the economy picks up."

    Ford cars are gas hogs? Ford has the Focus and Fusion which compete very well in their segment. Many Ford vehicles have assumed mpg leadership for their segment.

    Ford cars are too big? Ford produces competive cars in each segment, it is not like Ford just produces full size sedans and nothing else.

    Ford cars are too costly? Apparently consumers do not agree with you as Ford has pick up over 3.5% market share in the U.S. since the start of the year.

    Taps made a much more convincing arguement - Ford's debt load is very high and something the company needs to clean up for the stock to contine to grow.

  • Report this Comment On July 06, 2009, at 10:39 AM, dnliu wrote:

    This is pure nonsense. You don't know the future, you don't have a crystal ball, you are not God. So you don't know if Ford stock will drop. It's all pure speculation. Worst of all, you are scaring investors away by telling them this that you don't know if it's true. By doing this, you are hurting current investors by getting people to sell off their stock and making Ford share value drop, making current investors lose money. That's like going to a theater and yelling fire and causing a panic. Unless you have a crystal ball or a time machine, stop say nonsense like this because you don't know the future!

  • Report this Comment On July 06, 2009, at 10:45 AM, DeadmanLiving wrote:

    I will agree that he stock is over priced currently but there are some factors that were not mentioned. Firstly Ford has other markets other than the U.S. They have been strong in Europe, where they have learned how to make fuel efficient cars very well. Also they have made good inroads into China. Their debt and the union are the only things that are currently haunting them and as far as I can tell they are trying their best to eliminate the debt and make concessions with the unions in order to turn the company around.

  • Report this Comment On July 06, 2009, at 11:25 AM, wigginsrl wrote:

    When is it not a sin to lie? When it supports your short position, apparently! Ford has been a ray of hope in a desperately sick American economy, in which individuals and corporations are more and more deciding to let the government run everything and take care of us all. O.K., you seers and financial geniuses - where does socialism or fascism work to produce a better society? Come on, I'm waiting. Fools, quit shorting the only automobile company trying to make capitalism work. Your get-rich-quick scheme is going to turn on you. Billions of dollars won't help you if the dollars are worthless.

  • Report this Comment On July 06, 2009, at 11:27 AM, kriswone wrote:

    How can ford stock be overpriced? GM sells at just under a dollar. What you are implying is that a non-bankrupt company is not worth 4 to 5 times more?

    If we are to believe that then why is Toyota hovering above 70 dollars? Toyota is not bankrupt, are they overvalued? 70 times overvalued?

    The motley fool should be held not be posting opinions as articles.

  • Report this Comment On July 06, 2009, at 12:20 PM, kriswone wrote:

    *The motley fool should not be posting members opinions as articles.

  • Report this Comment On July 06, 2009, at 12:40 PM, bmayer79 wrote:

    The quote from TSIF is nonsense being repeated by people who don't check facts.

    Check your facts at http://www.fueleconomy.gov/feg/FEG2009.pdf.

    Ford Explorer V8 2WD is 14 city, 20 hwy $30.375 (ford.com)

    Toyota 4Runner V8 2WD is 15 city, 19 hwy $30,655 (toyota.com)

    You can do the research on 2010 Fusion vs. Camry.

  • Report this Comment On July 06, 2009, at 3:28 PM, pondee619 wrote:

    "On May 05, 2009, at 2:42 PM, TMFEZMagic wrote:

    Hi pondee619,

    Thanks for reading and the great idea.

    We're currently in the process of creating a CAPS player to track all of the "Poised" and "Plunge" articles.

    We should have the player set up in no time, so stay tuned!

    Brian"

    BRIAN:

    Under what name are your "Poised to" stocks listed in CAPS? thanks

    PS: could anyone at the Fool forward this to Brian? I don't think he looks at his articles, or the comments thereto, once he writes them.

    Thanks:

    I see that you are back from the holiday weekend. You have not responded to my many requests for this "new" players name. You said that you would be creating said player "in no time".

    Are you just lazy, inconsiderate or lying about setting up the CAPS player? Or, could it be, that you ran a trial of said player and found how poorly it is going, putting the lie to the premise of your series?

  • Report this Comment On July 06, 2009, at 4:56 PM, kinnedie wrote:

    TSIF (Toyota Sales Information Fragmentation) located in Long Beach, Ca. has been so busy lately burying recall notice stories in search engines, I am amazed that they would have time to comment on Ford's situation.

  • Report this Comment On July 06, 2009, at 5:37 PM, daytraderwoman wrote:

    I like reading Motley Fool articles but for the life of me cannot figure out why Motley continues to try ruin Fords stock by the articles he writes. Ford dropped today as expected. A couple of days ago the same thing was said about Boeing and the stock dropped!! Go figure. I guess the posituve is being able to buy stock on the cheap.

  • Report this Comment On July 06, 2009, at 6:04 PM, spawn44 wrote:

    Either Ford stock is to cheap or Toyota is to high. Under Mulally Ford is currently beating Toyota in the market. Toyota shares are 12 times more expensive. Ford's debt is secured by Ford assets. Ford will pay this debt with tax free dollars and improve the balance sheet during the pay down. Selling Ford shares now would be like jumping ship 200 milles from Hawaii after sailing around the Horn

    through a nasty winter storm.

  • Report this Comment On July 07, 2009, at 12:02 AM, tuckeroso wrote:

    Ford is on a comeback and will be very competitive with Toyota before they are through. Currently Toyota is selling for 75.61 and Ford is selling for 5.75 per share. Toyota's value is 13 times that of Ford based on these dollar amounts. I know Ford has yet to prove themselves, but I believe in them and know they will atleast contend with Toyota throughout the world as one of the top car makers on the planet. In my opinion Ford's stock can and will be close to that of Toyota's within the next five years.

  • Report this Comment On July 07, 2009, at 9:19 AM, broker1152 wrote:

    This is classic market manipulation at it's best. Robber Barons like these boys need their tounges ripped out and their fortunes turned over to charities. Understand that the market is not moving in broad enough swings for these thieves to make a living, so they force the issues. Fundamentals and cool heads will prevail and these culprits will go unchecked by regulators. Stay in the game, by taking advantage of the prevaling tactics. You also will make money.

  • Report this Comment On July 07, 2009, at 5:30 PM, Soup19 wrote:

    tuckeroso, spawn44, kriswone etc... you can't compare just stock prices to determine relative value of the companies. Just for starters, the companies have a different number of shares outstanding.

    If you have 2 idential companies one with 1,000 shares at $2 and another with 2,000 shares at $1... does that mean to you that the $2 share is overpriced? Or that one company is worth twice as much as the other?

    It makes no sense to compare GM, Ford, & Toyota share prices alone.

  • Report this Comment On July 07, 2009, at 7:26 PM, spawn44 wrote:

    Soup 19 tell me something I don't know. My point was the spread was so great the valuations make no sense when looking at the present performances of the two companies

  • Report this Comment On July 10, 2009, at 5:53 PM, TSIF wrote:

    Hmmm, they caught a nerve on this one. Don't mess with Baseball, Apple Pie or .....no sorry that's Chevrolet.

    It's impossible to change peoples opinions, but just to clairify to anyone who might care.....

    1. The "Job" of Motley Fools writers is to toss together some articles that call attention to their services. If they can control stock prices, especially on a multi-Billion dollar company then that would be pretty amazing.

    2. Motley Fool Caps players are "playing" an investment game. The object of the game is to predict what they believe an equity will do compared to the S&P as a benchmark. Some take the time to explain why, and occasionally some feel there are occasional stocks that they believe Bankruptcy is an option. This is thier opinion.

    Thosse who take the time to write pitches, (reasons that MF writers sometimes quote in articles), aren't trying to control the market either. Most are looking for some dialogue, some are just using the pitch as a reminder of what their thoughts were when they made their up or down call. The pitch is there to read, or ignore.

    IN the case of TSIF's pitches, they are generally very wordy. SINCE TSIF spends a lot of time "playing" the game, his "luck" at timing sometimes adds enough points to his score to qualify as a CAPs All Star. This award can be achieved by a very few picks and a good day, or lots of picks averaged together. SInce the majority of CAPS players don't manage their accounts too closely or just use them to track a few stocks, it's not hard to get to the top top of the pile sometimes.

    Since they are VERY wordy pitches, MF writers only take a snapshot. Sometimes what may generate the most noise.

    In the FULL PITCH. TSIF said that HE OWNED Ford stock, but thought it was over valued at $6, but was holding his stock. The guess was that since FORD is not expected to be profitable for several years that it is UNLIKELY to beat the S&P.....(again the point of the game).

    In regard to being called out in TSIF's original pitch and this snippet quote on ONE sentence of his pitch concerning gas mileage: BMAYER72 (who has no picks or pitches), provided the data that proved that a Ford Explorer can't get 20 MPG downhill in the City as I stated in my pitch.

    FORD has a NEGATIVE $17 BILLION dollar book value and a NEGATIVE $17 Billion in stockholder Equity. If you think you can compare a NEGATIVE $17 Billion dollar book value sporting $6 per share to compay with a $102 BILLION Dollar Equity balance with a share price of $73 and not see that Ford is OVER VALUED compared to Toyota then you should spend more time studying than posting when someone throws dirt at your Ford truck....isn't it Ford Tough?

    Finally, what good is having high Sales if you lose money on each sale? If you have high sales, but have have to drop your price to compete to the point that you are taking a loss, are you competing. Check out FORD's resale value, owner loyalty, reliability, etc, and compare it to the other companies....buy the Ford if you want to, but if you have to pretend it's a better car and a company with $17 Billion in net equity that is tripping on itself is a better company to invest in, then have at it.

    TSIF (THE SKY Isn't Falling), at least not today, but it might someday.

  • Report this Comment On September 01, 2009, at 7:38 PM, rlm3156 wrote:

    Ford said its U.S. light-vehicle sales rose 17% in August from a year ago.They are not going anywhere but up.The new Taurus is impressive. See for yourselves fellow fools,

    http://www.fordvehicles.com/2010taurus/

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