Kerkorian senses Ford might have a better idea: Might up 5.5% stake
Posted by: admin in Industry NewsFiled under: Forecasts, Good news, Industry, Ford Motor (F)
Billionaire investor Kirk Kerkorian stated he might up his stake in Ford beyond 5.5%, as he follows-through on his intention to purchase additional shares, Bloomberg News reported Friday.
Kerkorian, in a Friday SEC filing, reiterated that his Tracinda Corp. will pay $8.50 per share for 20 million additional shares of Ford (NYSE: F), which will give him a 5.5% stake, Bloomberg News reported. In the filing, Tracinda added that it may “from time to time, propose business strategies and, subsequent to the expiration of the offer, acquire additional shares.”
Shares of Ford rose 5 cents to $8.25 in Friday morning trading on the news.
A gold star for Ford
Independent stock analyst C. Leonard Bauer told BloggingStocks Friday Kerkorian’s stance is “a definite gold star” for Ford, concerning its turnaround program.
“Kerkorian’s decision, because of his investment history and knowledge of the auto sector, will telegraph to other institutional investors that it’s time to begin moderately adding to your Ford position,” Bauer stated. “Don’t misunderstand, this turnaround story is only about 30% complete, but at this stage you can make a good case for buying a modest share amount.” Bauer added that he does not have a rating on Ford nor own the company’s shares.
Ford installed former Boeing (NYSE: BA) executive Alan Mulally as part of an effort to re-vamp production and revise its fleet to compete in the global auto marketplace. Ford’s legacy cost reduction efforts have gone well; fleet revision progress has been slower, many analysts agree.
Huge headwinds
Further, in addition to the anemic-growth U.S. economy, Ford, like other U.S. automakers, must deal with the new, high-price gasoline era, which features gasoline above $3.40 per gallon in most regions of the United States. Oil Friday continued its seemingly relentless march higher, pushing through the $125 per barrel level for the first time in history.
Counter-intuitively, Bauer said the record-high gasoline prices might help Ford, in the long run.
“The high price does create a huge amount of short-term pain for the company, but the reality of high gasoline prices, the permanence of oil above $100 per barrel, tells Ford it has to create many, higher-mileage cars,” Bauer stated. “Fuel efficiency has to be at the core of their manufacturing model. It tells Ford executives, if you build tanks [inefficient SUVs], you’re done as a company. In that sense, $100 oil will lead to a stronger Ford, from a fleet standpoint.”
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