F - Ford Motors

F (Ford Motors)

• Entry price: $7.4
• Risk Level: 8
• Profit Potential: 9
• 1 yr Target Price: $11 - $13

Ford’s sales catches up, but still wait and watch

As the US government supported ‘clunkers’ program came to an end, encouraging signs are emerging for troubled US carmaker Ford Motor Company.

Till some days back, the company was high above in the list of top-10 stocks, one should never buy. But now with the US government’s relief program it seems that the situation is changing for the Detroit company.

Amidst economic meltdown, Ford was the only carmaker in US that steered itself of bankruptcy and emergency federal funding.

And it was the ‘$1 billion clunker’s’ program with which the company made a turnaround. According to this program, existing Ford customers will get an incentive if they want to exchange their monstrous gas guzzlers with brand new fuel-efficient cars.

Recent figures have shown that due to this program, Ford’s sales rose by 17 percent last month. The increase in sales was the second consecutive in two months, Ford said in a statement Tuesday.

The carmaker revealed that there was also an increase in its F-Series pickup trucks. It happened for the first time since October 2006, and signs are encouraging that the US economic is in its recovery stage.

Ford said that it had sales of all its brands increased to 182,149 in August, as compared to 155,690 vehicles last year. Due to the ‘clunkers’ program, Ford’s July sale rose by 2.3 percent.

Sales of Ford Motor’s premium brands like Ford, Mercury and Lincoln increased by 16.8 percent to 176,323 units. The carmaker said that there was also an increase in the sales of Volvo, which saw a hike of 24.8 percent to 5,826 vehicles.

The company said that it is witnessing a steady decline in sales of SUV, which slumped t0 33.7 percent while sales of trucks and vans increased to 12.2 percent.

From Ford’s stable, the biggest hit has been its Focus compact cars. A record 25,547 Focus cars were sold in August and the figures were 56 percent higher than last year’s figures. The Focus was also the highest selling car in the ‘clunkers’ program and customers are moving to more energy efficient cars.

Ford strongly feels that the numbers would improve by the end of the 2009 and feels that nearly 12.5 million cars would be sold next year as consumers will get to buy more since the pressure on spending is likely to get eased.

Despite the increase in sales, Ford’s stocks dipped to $7.40. But with the sales expected to become stronger the stocks are also going to improve.  This makes Ford a good selection for our Hot Stocks to Buy portfolio.

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