Ford Motor (F)

Doing really, really well. The automobile stocks are your super high beta plays. If you really like torque and volatility, these are the guys to play it in. If we get to 17 million units here, this is a great stock to own. The issue with this company is that it has lots of leverage. He prefers the more conservative approach by owning something like Magna (MG-T).

Likes the auto sector. Unemployment for US College graduates is 3.8%, for high school about 7.4% and non-high school 11.1%. Automobile jobs is one way to bring those numbers down. He feels the fed is trying to maintain the momentum in the car business. There is pent-up demand.

Switch to BMW, which has done well. They lead in patents and loyalty. You have better growth but F-N is probably okay. Hold it if you own it going forward.

Great example of what should work in an industry that goes through a restructuring. They were the first. Put their balance sheet in order years ago so debt levels are very manageable. Pension liabilities were taking care of so it now comes down to their ability to generate cash flow. Their F150 is the best-selling vehicle in the category and is highly focused and dependent on housing and construction. They have about a $2 billion hole in their earnings that comes from Europe but appears to be getting this under control. Doubled their dividend this year and are probably about to double it again.

Up 80% and the last 12 months but is still not a rich valuation, trading at 11 or 12 times earnings with a 10%-4% growth rate. Their F100 trucks are selling well.

After that big long meltdown from the mid-2000 down to 2008/2009, when virtually all of its equity disappeared, it has been undergoing the slow process of rebuilding equity from earnings. Missed a spectacular opportunity to do an underwriting to really build the equity of the company when the stock was in the $17 area. Normally it peaks out at around 2X BV but is well over that right now. If things get weak, it is going to go down.

Prefers GM. In a much better position because of restricting that Ford is.

(Market Call Minute) Likes it and it could go a lot further.

After breaking down, it came up and hugged the 50 day moving average. This is a pretty good sell signal. That is a significant point of resistance. We also have a loose cup and handle. He’d rather buy at $11 than $14.

(Market Call Minute.) Would prefer the parts companies instead. This has a big European exposure so he is not so hot on that.

(Recently bought some.) Average car in the US is now 12 years old. This company is continuing to deliver in terms of quality and they are also fixing their balance sheet.

In terms of investment grade companies, this one is still working its way back to those levels. Have a high, high debt level and a large unfunded pension liability. Producing a lot of cash and good cars but they have some problems. Large European exposure with about 42%-43% of their revenues.

He would have no problem whatsoever with buying this stock. Very strong cash flow generation. Not terribly expensive. Realistically, you could see the dividend work itself higher. He is looking at this one himself.

Would prefer General Motors (GM-N), which is recovering but trading at a much lower PE ratio than this. This company has done incredibly well getting back on its feet but its balance sheet is atrocious. Of all of them he would prefer Magna (MG-T).

There is some pretty good momentum with auto makers. Prefers GM, who was bailed out.