Automakers Outperform in May: Sell Ford, GM & Toyota

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Auto stocks are in the news today, due to higher-than-expected sales of pickups and SUV’s in May.  I’m not going to recap the info — you can read all about it from Bloomberg.  Rather I will give investors my opinion on what they should do with the stocks of some of the major auto companies.

You can see in my comments from my article at StreetAuthority today that I am definitely not bullish on auto companies right now.

  • “More recently, the stocks that are consistently ending up in my buy list include anything transportation-related (with the exception of automakers): airplanes, freight (trucking), railroads, rental cars and trucks, and even motorcycles.”

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General Motors Company (GM, $35.13, up $0.26 midday)  —  There is no material change in GM’s earnings outlook, price/earnings ratio (PE), or dividend since I last wrote about the company on May 1.  Earnings per share (EPS) are still projected to fall 1% this year.  (Please read that article, TARP Report Reveals Gov’t & GM Screwed Taxpayers More than Previously Thought.)

All of my advice about the GM stock chart from March 29 and May 1 remains intact.  If I owned the stock, I’d use a stop-loss order to protect my capital from bad news relating to recalls and government investigations.  And I would sell when it rises to $37.25.

Note:  The ex-dividend date is June 6.  Investors who own the shares at the market close on June 5 will receive the next dividend.

Goodfellow LLC Rating: Sell near $37.25, Volatile, Public.  (06-03-14)

GM Chart

GM data by YCharts


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Ford Motor Company (F, $16.55, up $0.11 midday) — Ford’s shares do not earn a buy rating at Goodfellow LLC due to high debt levels; and because EPS are projected to fall 18.5% this year.  Investors cannot reasonably expect stock prices to rise when companies are not growing their earnings, and that’s why strong earnings growth is my first criteria when I’m screening stocks for possible purchase.

I discussed Ford Motor Co. on February 3.  My opinion has not changed.  At that time, I said, “The best it might reach in the short-term is about $15.80.”  The stock then rose to $15.83 in early March, before having another pullback.

At this point, the stock could rise to October 2013 resistance levels around $17.75, but investors are gambling with an inferior stock.  In order to minimize risk, I always encourage investors to stick with stocks that have strong projected earnings growth and bullish charts.

Goodfellow LLC Rating:  Sell near $17.75, Volatile, Public.  (06-03-14)

F Chart

F data by YCharts

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Toyota Motor Corp. (TM, $114.87, up $0.92 midday) — I last wrote about Toyota on March 20, and I encourage investors to review that commentary.

Toyota’s EPS are expected to grow 8% in 2014; then not grow at all in 2015.  This is lackluster earnings performance, and not something that investors should consider acceptable when they’re searching for stocks in the hopes of achieving capital gains.

The more investors learn to rule out stocks with poor earnings growth, or high debt levels, or high PE’s, or poor stock charts, the more they’ll end up with excellent stocks that have every reason to grow, and deliver capital gains.

Toyota shares fell steadily for six months through April 2014.  On March 3 I said, “Minimally, the stock should fall to $100 before it begins stabilizing.”  The stock proceeded to fall to $103.38 about five weeks later, then began to rebound.

If I owned TM shares, I would sell at $116, and switch into a stock with strong earnings growth and a more bullish chart.  I would expect my principal to grow more quickly in a healthy, growing company’s stock, rather than in a problem-plagued company’s stock, with poor earnings growth.

Goodfellow LLC rating:  Sell at $116, Public.  (06/3/14)

TM Chart

TM data by YCharts


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Happy investing!

Crista Huff


Goodfellow LLC

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