Ford Will Burn Your Portfolio

By Colleen Paulson
July 30, 2008 | Comments (2)

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With its one-star Motley Fool CAPS rating and a share price in the doldrums, it seems that investors the market over agree that Ford (NYSE: F) is a company that only a mother could love.

The financial media is quick to point to $4-per-gallon gasoline as the root of Ford's problems, but the company was careening into a ditch well before it cost upward of $100 to fill up a Ford F-150. The company's debt load and huge fixed-cost structure have proved to be heavy burdens, and the company has been slowly ceding share in its bread-and-butter U.S. market to foreign rivals Toyota (NYSE: TM), Honda (NYSE: HMC), and Nissan (Nasdaq: NSANY).

The numbers tell the tale: Ford hasn't posted a return on invested capital above 2% since 1999. Ouch. Tack on that long-standing massive debt and restructuring plans that date back to the early years of the George W. Bush presidency, and it is clear that Ford's struggles are more than just a newfound problem. Oh, and in case you're wondering, not only have Toyota, Honda, and Nissan -- those smooth foreign operators -- all posted marvelously superior financial results compared to Ford over the past several years, but they all also sport CAPS ratings of three stars or higher. Talk about rubbing salt in the wound.

Of course, Ford isn't alone in its waning value. Automotive cohort General Motors (NYSE: GM) is another unloved, one-star stock with dismal recent results. Both of these down-and-out autos could see their shares accelerate if the market turns, but for my money, Fools who value their hard-earned savings would do best looking elsewhere.

Do you agree with Fool readers that Ford deserves a one-star rating? Join our CAPS community, and place your vote today!

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Fool contributor Colleen Paulson owns shares of Honda and loves her 1999 Honda Accord. Nissan is a Global Gains recommendation. The Fool's disclosure policy is always a five-star investment.

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  • Report this Comment On July 30, 2008, at 4:12 PM, skittalz125 wrote:

    First off, Ford may be having some problems at the moment but the name Ford itself has more value than $4 a share. Over the past few months Fords CEO (formally a Boeing executive) Alan Mulally has been shutting down US factories so that they can be 'retooled' for creating cars that have been quite popular in Europe. Not only has Ford started down the path of producing fuel efficient cars, they are also responsible for the new hybrid SUV. The automotive industry is bound to come back soon especially with oil on its way back down and Presidents Bush's announcement in regards to finding fuel in our own country.

    Its also interesting you bring up GM, who has such high international sales that it would be impossible to go bankrupt.

    What people need to know is that the world doesn't revolve around the US...

    These stocks will be up atleast $20 - $30 in a year or two.... mark my words

  • Report this Comment On July 30, 2008, at 5:13 PM, TMFMarlowe wrote:

    Colleen, the numbers don't come close to telling the tale. Ford's in a tight spot, but they're playing their ace in the hole -- bringing their excellent, fuel-efficient European lineup to the US -- and they've got one of America's best CEOs in Alan Mulally. I realize it's easy to do a quickie article writing them off, but some deeper analysis might show you a really interesting story.

    I think this has the potential to be a fantastic sleeper value play, but I haven't yet decided whether to play it by buying common stock or via senior debt. It COULD still get worse before it gets better.

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Related Tickers

12/2/2009 4:00 PM
F $9.01 Up +0.13 +1.46%
Ford Motor Company CAPS Rating: **
GM $0.75 Down +0.00 +0.00%
General Motors Cor… CAPS Rating: *
HMC $33.06 Up +0.70 +2.16%
Honda Motor Co., L… CAPS Rating: *****
TM $81.98 Up +0.53 +0.65%
Toyota Motor Corp… CAPS Rating: ****
NSANY $14.49 Down +0.00 +0.00%
Nissan Motor Co.,… CAPS Rating: **

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