ETFs

Ford Has Bright Outlook

Recently, shares of Ford Motor Company (F) have hit their highest price in five years and there are plenty of indicators that suggest a bright outlook for the automaker lies ahead.

According to the latest Consumer Report rankings, Ford is the only U.S. auto manufacturer who has seen improved quality and surpassed Japanese automaker, Mitsubishi, on the reliability rankings list.  Additionally, recall-related problems that have hit the world’s largest automaker, Toyota Motor Company (TM), struggles by General Motors to get back on their feet, and the continuing woes that loom over Chrysler have enabled Ford to grab additional market share. 

Fundamentally speaking, Ford appears to be in good shape.  As the result of a restructured business model, the company is able to remain globally competitive and is boasting positive operating cash flows.  This model is supported by increased efficiency through a more disciplined approach toward production levels and incentives, new product offerings which focus on fuel efficiency and innovation and new UAW agreements which expand cost benefits. 

These new structural changes have enabled Ford to generate new market share and healthy operating financials.  Ford has been able expand globally and gain significant market share in Europe and the Asia Pacific regions. 

The last force that is working in the automakers favor is the anticipation of increased demand for automobiles both globally and domestically.  On the global forefront, purchasing power in developing nations is on the rise and hence demand for products like automobiles is likely to follow.  Domestically, some experts are suggesting that the automobile sector will be the fastest growing US industry over the next five years. 

Ford has emerged out of the global financial meltdown with new weapons and will likely reap the benefits and witness positive price support.  The stock closed at $13.28 on Tuesday.

Other equities that could be influenced by Ford include the Consumer Discret Select Sector SPDR (XLY), which allocates 3.9% of its assets to Ford and the PowerShares Dynamic Consumer Discretionary (PEZ), which boasts Ford as its top holding at 3% of its assets.  XLY and PEZ closed at $33.08 and $22.39 on Tuesday, respectively.

Although these positive forces are likely to support an upward trend in Ford, a slowdown in demand, a hiccup in the global economic recovery and incentives offered by competitors could cause a rain on the automakers parade.  With this in mind, a good way to protect against these risks is through the implementation of an exit strategy which triggers price points at which an upward trend could potentially be coming to an end.

According to the latest data at www.SmartStops.net, an upward trend in the Ford could come to an end at $12.74.  An upward trend in XLY and PEZ could come to an end at the following price points: XLY at $32.04 and PEZ at $21.76.  These price points change on a daily basis as market conditions fluctuate and updated data can be found at www.SmartStops.net.

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