1 Stock to Buy in December

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Two years ago, I attended a press conference, and a company swept me off my feet.

But it wasn't love at first sight.

I went into the press conference with the same preconceptions as everyone else. The company's industry was devastated as a result of the recession, and bankruptcy fears surged. Foreign competition had been eating its lunch for years. The press reports were bad. And demand was in the tank.

Yet the company's CEO impressed me enough to dig in deeper. When I did, I loved the turnaround story I was seeing. 

I was impressed, but I didn't recommend buying stock in the company back then. Instead, I decided to hold off, promising that I'd "be watching, hoping for a dip in the road that leads to a cheaper buy-in price."

Well, that cheaper buy-in price is here.

1 stock to buy in December
What's the company? It's Ford (NYS: F) .

If you still think an American car company can't compete with Toyota (NYS: TM) , Honda (NYS: HMC) , Volkswagen, BMW, Hyundai, and the rest, I think you're wrong.

We talk about the power of management a lot at The Motley Fool, and I think Ford's CEO, Alan Mulally, is the real deal. An engineer by training, he came over to Ford from Boeing just five years ago. But in that short time, he's made aggressive, forward-thinking moves that we're just not used to in the American car industry.

America collectively realized it was time to repent our free-spending ways in 2008 as the economy punched us in the face. Smart leaders like JPMorgan's (NYS: JPM) Jamie Dimon started securing their businesses a year or two in advance of the day of reckoning. This preparation saved their companies from the much worse fates that their peers suffered.  

Alan Mulally is also on that short list of business leaders who brought in the deck chairs before the storm. Soon after he came to Ford in September 2006, he eliminated Ford's dividend and started slashing costs. This included selling or gutting Ford's laundry list of non-core brands. He eventually sold Jaguar, Land Rover, Aston Martin, and Volvo, reduced Ford's stake in Mazda, and shut down Mercury to focus on Ford for the masses and Lincoln for the luxury market.

Perhaps most controversially, he created a war chest by leveraging Ford further, borrowing over $20 billion. Why? He did it to finance his overhaul plans and as "a cushion to protect for a recession or other unexpected event."

His timing couldn't have been better. He borrowed during bubble times when banks were more than happy to lend -- even to a highly leveraged, capital-intensive car company that had recently reported a string of losses.

When the financial crisis hit, GM (NYS: GM) and Chrysler were forced into bankruptcy. Times weren't rosy for Ford, but since it got a couple of years' head start, it survived without government aid.

Now Ford's thriving
Surviving is nice. But thriving is what we're after.

When I looked at Ford two years ago, I saw a turnaround story that I believed in. Because of all the changes Mulally implemented (and admittedly some boost from the "Cash for Clunkers" program), Ford had turned from a serious money loser to a moneymaker.

But back then, the story was just getting started and I wanted a better price.

Since then, the S&P 500 (INDEX: ^GSPC) is up 15% and the Dow Jones (INDEX: ^DJI) is up 19%. Meanwhile, Ford is down about 7%.

So the price is a bit better on both an absolute and a relative basis. More important, Ford has continued to be operationally excellent. It's continued its initiatives to streamline. Its labor situation is better, with a new four-year agreement with the UAW. It's gaining market share by focusing on providing cars consumers actually want (e.g., smaller, more fuel-efficient cars in a rising-energy-price world, a partnership with upstart Zipcar (NAS: ZIP) , and reliability that's finally competing with Honda and Toyota). It's paying down its debt, earning credit upgrades. And it's delivered nine straight quarters of positive pre-tax operating profits.

The bottom line
In five short years, Alan Mulally has effected an amazing turnaround at Ford, pumping out profits during a rough economy. Yet Ford is currently at $10.60 a share, just 6.4 times its trailing earnings. It's a buy today, and an even better one if shares slip below $10.

I'm bullish on Ford, but our chief investment officer selected a different stock as the No. 1 stock for the next year. Find out which stock in our brand-new free report: "The Motley Fool's Top Stock for 2012." I invite you to take a copy, free for a limited time. Just click here to access the report and find out the name of this legendary company.

At the time this article was published Anand Chokkaveluowns shares of GM and JPMorgan.The Motley Fool owns shares of JPMorgan Chase, Zipcar, and Ford.Motley Fool newsletter serviceshave recommended buying shares of Ford, Zipcar, and General Motors. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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