Ford Rewards Contrarian Play
When everyone knows something, that’s
when the contrarian gets interested. Take Ford Motor Co. The stock sold off in
the wake of the Firestone tire recall, the most publicized corporate controversy
of the year. On Friday, the company reported better than expected sales, showing
the resilience of its brands despite the crisis. On Tuesday, the stock went on a
tear.
The catalyst for the move appears to
be August sales. On Friday, the No. 2 automaker said its U.S. sales dropped 3.7%
for the month vs. Wall Street forecasts ranging between declines of 4% and 6%.
Ford said sales for its Ford Explorer sport utility vehicle, connected to most
of the reported deaths and injuries involving the recalled Firestone tires, fell
0.8%, when one adjusted sales to account for an extra selling day in August 2000
vs. August 1999. Without the adjustment, Explorer sales actually set a record
for the month of August.
Ford
(
F |
Quote |
Chart |
News |
PowerRating) shares Tuesday gained 2 1/2
to 27 1/2. To my eye, it looks like the stock still has room on the upside.
Tuesday’s volume was more than double the stock’s average daily trade as
averaged over the past 50 sessions, the stock gapped up and rose to close near
the top of the day’s range, and its Relative Strength Index remains well below
overbought readings of 70 or higher.
 Internet Capital Group
(
ICGE |
Quote |
Chart |
News |
PowerRating)
said on Tuesday it had bought for $170 million in stock a controlling stake in
PaperExchange.com, a closely held operator of an online marketplace for the pulp
and paper industry. The acquired company also filed to shelve its planned
initial public offering.
ICGE shares gained 3 11/16 to 39 1/16
on twice its usual trade. While the stock has shown signs of having formed a
durable bottom, I would presume that it faces too much overhead supply at this
stage to regain momentum. At minimum, let the stock overcome its 200-day moving
average before considering entry points.
All stocks, of course, are risky. On
any new trade, be sure to reduce your risk by limiting your position size and
setting a protective stop where you will sell your buy or cover your short to
cap your losses in case the market turns against you.