Ford Motor’s (F, $8.21, up $0.71) stock has been active over the past few trading sessions after better-than-expected earnings and news that billionaire Kirk Kerkorian will expand his stake in Ford to 5.6%.
Last Thursday, Ford Motor said it recorded a $100 million profit which pushed the stock up 12% to close at $8.40. Then on Friday, Bear Stearns (BSC, $10.60, down $0.12) downgraded the stock and it promptly closed at $7.50. Volume was heavy both days as 241 million shares traded on Thursday and another 227 million shares traded on Friday. Average trading volume is about 61 million shares. Bear Stearns wasn’t the only firm that issued a downgrade as three other different analysts downgraded the stock despite what appears to be a turnaround story.
Yesterday the stock traded another 170 million shares on news Kerkorian’s investment company, Tracinda Corporation, is offering $8.50 per share in cash for up to 20 million additional shares. Tracinda already owns 100 million Ford shares which it began accumulating in early April at an average cost of $6.91 a share. If this latest offer is accepted, Kerkorian’s stake will increase from 4.7% to 5.6%. A takeover is unlikely because the Ford family controls 40% of the voting rights.
I’m not a big believer in Ford or any auto stocks at the moment due to the uncertainties ahead that face the auto industry. GM (GM, $21.94, up $0.56) and Toyota (TM, $101.96, down $0.10) are ahead of Ford when it comes to design and technology but the economy continues to weaken and gas is going through the roof. Given the risk/ reward scenarios, I’d rather invest elsewhere.