It is always difficult deciding how to play a stock when it goes into an overwhelmingly bullish trend. As we have seen with Ford Motor Co. (F) recently, these bullish trends can accelerate an undervalued stock above and beyond its true value in a matter of weeks. Ford has been on a complete roll lately, but it appears now that stone has picked up moss and begun to slow down. With downgrades from Barclays and Deutsche Bank, it looks as though Ford is ready to pullback. How far will the pullback bring shares, and will it be short-lived?
Thesis & Catalyst For Ford Motor Company
Despite all the optimism surrounding Ford, Tuesday's earnings report is going to be the deciding catalyst of whether or not Ford's stock continues this bullish pattern or pulls back. This recent run-up in stock price would lead me to believe that Ford's European situation is improving and the company was able to decrease debt in Europe, from $404 million this previous quarter. If Ford shows heavy improvement overseas, and continues to have record sales in America, I would buy with confidence on Tuesday and hold for the duration of 2013. However, if the opposite holds true, and Ford either has decreased sales or shows no improvement on its debt in Europe, I could see the stock pulling back to under $12 per share.
There is definitely an opportunity here for investors, but I think buying before Tuesday's conference call, with the stock at its current price is just too risky. Two institutional downgrades in the week prior to an earnings report is a worrying situation. I would much rather play this earnings report on the safe side and not buy beforehand. There is a lot that could go right in this conference call, but at the same time, a lot could go wrong. You don't want to end up being left like Apple (AAPL) share owners were this past week. Please take my advice to heart, and wait until the conference call on Tuesday to make your move on Ford.
In other news, Ford recently doubled its quarterly dividend from $0.05 to $0.10 per share, adding further long-term value to the companies stock for its investors.
Disclosure: I am long F.