ThePanelist.com - Should I Buy Ford (F)? If You Must, Buy the Preferred Not the Common

Should I Buy Ford (F)? If You Must, Buy the Preferred Not the Common

Written by David Neubert

Sunday, 30 December 2007

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

Dear Mike:
I haven't really owned Ford common shares (F - $6.70) 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 led 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 and 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.

Photo:Financial Aid Podcast, Creative Commons, Flickr

Photo:drp, Creative Commons, Flickr

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.