P/E – N/A        EBITDA – 4.92 Billion           EV/EBITDA – 27.25

My intentions for this choice is to get us to think a little outside the box.  From a long term perspective the best time to buy into a company is when there is turmoil and things are uncertain (with low stock price, not the $1.20 earlier this year, but $5.75 or 18 Billion in cap), the problem is the risk of bankruptcy – in today’s world “long term” might lead you right into a goose egg.

Think about the car industry long term and macro – it is thriving because of population growth and new wealth from developing nations.

Now think about the car industry short term and micro – consumers are pinched, there is a lot of competition with brand names as well as with nations which want to identify with the indusrty, and innovation with the reduction of green house gas emissions is adding to the uncertainty.

There is a big gap here between these two perspectives and there is much to gain with a crystal ball.

So why Ford?  Lets dig into the negative before the positive.

Ford is going to have significant challenges with their sizable debt of around $150 Billion in today’s market.  The fact is Ford has managed debt this size for a very long time, but the credit market is requiring a higher interest rate which makes this debt a huge road block.  To make matters worse all the other car companies who have received bail out money from their governments in for example the US, Germany and France will have the ability to get lower rates on their loans which will free up more cash to the competition.  One more thing to add, the bankrupt competitors will have somewhat of an ability to start fresh with the books.

And now for why Ford can have long term positive results.  When the recession ends for the car industry, Ford’s business model will have made some efficiency adjustments, but it will ultimatly look profitable, freeing up credit and lowering the interest payments on their debt.  Cars should once again become a local commadity and the competition will suffer because of the strings which came with the bail outs – in general the local difference is the number of dealership closings.  Ford has been able to keep more dealerships open, this will create local markets with low competition.  The innovation difference can come with ability to react to new technologies in gas savings and emission reduction in the mass car production market.  Ford’s employees will be able to take new technologies to a large market, with less oversight by regulators.

This is a risk, $5.75 a share is still low long term (could be high short term), recommend a sell above $15 a share in three to five years when the micro conditions improve.