Ford Motor Company (F) May Have a Short-Term Bumpy Ride

Ford Headquarters. Photo Courtesy of Ford Motor Company (NYSE:F).

I’ve been a Ford Motor Company (NYSE:F) supporter since Alan Mulally took over as CEO in 2006. Ford Motor Company (NYSE:F)’s been one of my most profitable investments, and one of the most intriguing business turnarounds to follow in decades. I’m a long-term investor so the short-term speed bumps that the company’s stock will hit don’t matter as much to me, but for those whose focus is only a few months it could be a bumpy ride.

Early bird gets the worm
One of the first issues that could cause a sell-off of Ford Motor Company (NYSE:F) stock is people simply taking profits. Take a look at the graph below to see how far Ford’s share price has surged this past year:

F data by YCharts

Ford Motor Company (NYSE:F)’s 52-week range is between $8.82 and $17.25, and those who bought exactly a year ago have realized an 86% increase at the time of this writing. That’s a healthy gain. In such a volatile industry where a company’s stock can tank, regardless of how well it’s performing, because of outside economic factors, such a gain could tempt people to take their profits now. In a market where the early seller typically gets the largest profit, it can make for a vicious cycle as people run to the exit.

If Ford continues its trek toward $18 it’s very possible we will see resistance in the share price as people begin to take profits from Ford’s nice one-year run-up. But, there are some short-term catalysts that will help mitigate that selling pressure.

The first positive catalyst would be short-term traders buying in before Ford Motor Company (NYSE:F)’s second-quarter earnings report on July 24 because they expect Ford to beat Wall Street estimates and give the stock a small boost. I think it’s a good bet in my book because it’s been a very strong first half of the year for Ford in the U.S. market. Ford Motor Company (NYSE:F) has gained market share in an industry seeing lowering incentives and higher transaction prices. In addition to that, the rebound in U.S. sales has been led by the most profitable full-size-truck segment – where Ford derives most of its profits. For those reasons we can expect a strong report and operating margins to again exceed 10%-11% – favorable to competitor General Motors Company (NYSE:GM) who reported a 6.2% operating margin last quarter.