May 19 2009
Characteristics of A Hot Stock
When looking to pick a stock, researchers such as me and other advanced investors look for some basics:
1. P/E: preferably under 20
2. Profits: Look at the net numbers: is it in the black? If it is not a profitable company, why bother investing in it? Does it have good financial backing while its new product make it to the market?
3. Are insiders trading? If the answer is “yes”, this is a great confidence builder.
4. What does the stock pricing charts look like? Is it on an upward trend? Do other investors want to buy it?
5. What kind of publicity and coverage is it getting? Is the news positive? Are other people looking at buying into it, too?
Ironically, one stock actually fits these characteristics: Ford (F). If you do the research, insiders are buying. A new product, the Fusion, is fuel sipping, rather than fuel guzzling, and stands to be an alternative, viable car product for this upcoming year.
Does that mean this is a good time to buy Ford? Consider the following:
1. Ford had gotten alternative funding, so it will not be at the finger-shaking of the American government.
2. Credit has loosend, and with the rise of gasoline prices in the past few weeks, people may be looking very seriously at a car with great gas mileage that is new.
3. True, there is an awful lot of vehicles on the lots that are new to compete with Ford’s newest product, but who wants a gas guzzler now? None of those vehicles can get the kind of gas mileage Ford’s engineers say that their car gets. Besides, the other companies either are out of business or may be in the near future. Ford stands to clean up all of the American business.
4. The Ford family secured private finance when they could have made the company go back to being private. This is key,because it means that others with more money than us believe in this company. And it also means that the family, with its very deep pockets can still buy out stockholders in the future.
If ever there was a time to buy Ford, it might be now. However, a cautious investor like me says wait. Ford has terrible competition right around the corner.
1. Tesla is close to having a handle on their sedan model. Right now their hot rod gets 150 mph. Of course, it is very expensive.
2. There is a company in France that has invented a vehicle which runs on air pressure. They are looking for a company to make the product here in the United States.
3. Toyota’s vehicles have had good working models on the market right now that are known for being fuel efficient. These vehicles are reasonably priced, and provide American jobs as well.
If anything, Ford has the advantage of name recognition, of having a vehicle that is on its way out the chute, and an infrastructure already to producing cars. The unions that provide workers may even be a little more willing to work with Ford in order to keep the union jobs that they have. However, the death knell for the unions is sounding, too, and Ford will probably not be able to compete long with super high wages on the floor. These next few years in the car industry promise to be very exciting.
