If You Must Own Ford, Go With Preferred Shares

Mike writes: I have a question regarding Ford Stock -- I see you
purchased Ford Stock years ago -- what is your take on the future of Ford?

Dear Mike,

I haven't really owned Ford common shares (F) directly except for a quick trade. I do own and have owned Ford Convertible Preferred (F-PRS -$32.74). 

In general, I think that Ford Motor Company is in trouble because they lack innovation. They rejected building and researching hybrids and will further continue to reject building cars with alternate energy sources unless lead and forced by the more innovative German, Japanese and maybe now Chinese manufacturers.

By owning the preferred stock, which I think of as a really risky subordinated high yield bond, I profit if Ford survives but I do not need them to lead. I would prefer to bet on the long term survival of Ford (either as a subsidiary of another company or because of a government bailout) than the long term success of Ford. 

This is not to say that the knock down to $6.70 a share might not represent an opportunity for a short term trade on the bounce back after the year-end tax sellers are done.

Disclosure:  I do not own Ford Motor (F). I do own Ford Motor Capital Preferred Trust II (F-PS).  I have traded Ford, and options on Ford in the past year.

Comments

[FrankNJ:]

Innovative Germans!??! What German automaker today offers Hybrid technology in the US? None! At least Ford has had a Hybrid available for years. As for the Japanese, they are innovative because their government treats the auto industry as critical to their economy. As such, the Japaneses government supplies grants and subsidized loans and incentives to make thier auto industry the best in the world. In the US, we burden the auto industry with increased regulation and no help from the government. CAFE is another blow to the auto industry, who has been the scapegoat for global warming, even though its contribution is minimal compared to other industries. Finally, cars in Europe have high MPG, not because of regulation (MPG regulations do not exist in Europe!), but because they tax the fuel heavily. This way, everything that burns oil is penalized, and not just one industry.

2008 Jan 01 01:43 AM

[User 135345:]

How did you get a job as a writer? It seems that you have done little if any research for your article. Ford Motor Company is working on a HYBRID deisel engine for there F 150 line of trucks that is expected to give the consumer an average of 50 miles per gallon. That sounds inovative to me, but really who am I.

2008 Jan 02 10:23 AM

[ballsschweaty:]

Hybrids suck and break down after about 50,000 miles. Ford is the worst automaker in the world.

2008 Jan 03 09:20 AM

[Riverrat:]

How do you like your Ford Preferred S now, Sept 30, 2008, trading at $15.55 to yield over 20%.

2008 Sep 30 01:08 PM