Has Ford stalled?
Just when it looked like American car manufacturers might make a turn around, Ford (F) completely tanked and took everybody else down with it. Is this just about oil prices and summer driving or should I get out now?
Answers
215 points
DirtyD answered 2 years ago …
I believe somebody recently asked a similar question and got a couple of decent answers:
http://www.tickerhound.com/questions/detail/200806140ce4c2/where-is-ford-h eaded
4087 points
EthanR answered 2 years ago …
Wow, the question above was asked only six days ago. At that time I said that I agreed that F was dead money for now, but a good long term play if you could get it near 5 dollars. The stock then was 5.81. This morning it is 5.07. As bad as things look right now, eventually some things will change.
The problem short term is that F is probably not finished going lower. Yesterday it hit 4.94 intraday, which is not only a 52 week low, but about the lowest price the stock has been since 1991! However, had you bought F in 1991, when it eventually reached 4.46, it must have looked just as bad as it does now. Yet, by 1998 you could have sold the stock for $32! And even if you don't hold your stocks that long, by the end of June, 1992, you could have sold F for $9.15, almost a double. So even if you bought it today and it goes lower, long term you will probably do very well.
One thing that history has proven, if you buy the great companies when they are in their worst moments and the stock is unloved, eventually over time you will make a lot of money. One only has to look at long term charts of MO, DIS, F and others to see this at work.
381 points
SirCrashton answered 2 years ago …
Overall, I agree with Ethan R. For that reason I adopted the following strategy: about a week ago I was looking for an inexpensive stock for which I could sell covered call options. In noting Ford's recent downtrend I discovered that the stock historically has found its lowest support at around $5.00 going back to October, 1992. Since I figured the company was going through hard times for obvious reasons (high gas prices, slowing economy) and not going out of business tomorrow, I bought F at $5.78 and immediately sold Sept $6.00 calls. This way, if the stock price didn't move at all, I would gain 4%/month. Even if the stock price dropped to $5.00 I would still break even on my investment. As things are going, the option will expire worthless, I'll retain the stock and sell another call for a forward month with the potential of realizing a gain on the stock purchase price as well as on the sale of options. Bottom line: it's possible to make money on an out-of-favor stock, even using a conservative strategy.
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197 points
whiteshadow204 answered 2 years ago …
The only thing I might add to SirCrashton's strategy (which sounds really good to me) is that for a $5 stock the option prices are so low that commission cuts into them. For example, as I'm writing this $6 strike price July call for F is selling for $0.08. I don't know about you, but I pay $14.95 commissions which means I need to sell 2 contracts just to break even.
Obviously if you have 5 figures to invest into the stock this isn't an issue for you, but for someone like me (who's lucky to have 4 figures to put into any one trade) that was the first thing I thought of when I read this.
381 points
SirCrashton answered 2 years ago …
Whiteshadow204 is right about the low option prices on cheap stocks. That's why I sold September calls in June, giving the option additional extrinsic/time value to make the trade profitable after subtracting comissions.
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