Ford: The high-risk stock is revved up for big rewards

Is Ford (F) Chief Executive Alan Mulally good or just lucky?

After Monday's quarterly results where the car maker blew away analysts' estimates and posted a surprise billion-dollar profit, who cares? The man is getting results.

Mulally, recall, successfully piloted Boeing (BA) through the turbulent times following the attacks of 9/11, so he certainly has the street cred to steer an automaker through pretty much the worst economic conditions the industry has ever faced. Why was Ford the only member of the Big Three to avoid bankruptcy and eschew supping at the taxpayer trough? Because Mulally tapped the credit markets for about $20 billion -- all the cash the company would need -- just before lending ground to a halt last year. Boy, does that look like a brilliant move in hindsight.
Now Ford is still a speculative, high-risk stock. A very lot could still go wrong. But we have a feeling there's plenty more upside in these shares -- partly because of effective management and partly because the domestic competition (GM and Chrysler) is still very much hobbled. After all, Ford is grabbing market share with cars -- gasp! -- that people actually want to buy, and their 2010 lineup is supposed to be even better.

"The quarter was good, plain and simple," says David Silver, an analyst with Wall Street Strategies who has a Buy call on the stock. "Ford has gained market share in 12 of the past 13 quarters. Cash flow turned positive during the quarter, and possibly the biggest highlight for me was the increase in pricing power."

Silver cautions that we're probably not yet at the point where Ford can be profitable for a full year, "but we are slowly getting there," he says, so don't be surprised if the company slips back into the red in the fourth quarter. However, on the plus side, the analyst says that beginning in 2010, year-over-year comparisons will get much easier.

At about $7.60 a share now, Silver's price target of $10 implies upside of more than 30 percent on the stock in the next 12 months or so. Bernard McGinn, president and chief investment officer of McGinn Investment Management, can make a case where the stock hits the low $20s in a couple of year's time.

Once again, this is speculative stuff. Don't bet the ranch (or the retirement, or the kids' college education on this one), but Ford appears to have the right management and models (not to mention weak domestic competition) to make good on those guesses.

No, we haven't driven a Ford lately, but we would get behind the wheel of the stock.
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