As we sit here a whisper from the 200-day moving average in the S&P, about 5% from all-time highs, we find ourselves at an inflection point. We’ve seen 5% corrections during this bull market, garden variety pullback seems to be the preferred upon terminology, but pullbacks of 10% or gasp, 20% have been few and far between.
Many market historians will tell you that 20% corrections happen about every three years. We’re due, no question and this could certainly be it. I have no idea.
Anyway, just off the top of my head I pulled up some well-known names after the close today to see if garden variety would be the right term this time around. I’m not so sure and if nothing else, as you’ll see, you have to wonder how much further some of these will fall based upon some LARGE pullbacks, some , technically, in a bear market.
To be clear, I rounded these numbers to the nearest full percent and used today’s closing price. The loss represents the move from the 52-wk high. I’ll let you look at the list and add some of my novice commentary after. Hopefully, this will get you to think about where we are.
Ford (F) -24%
General Motors (GM) -28%
Boeing (BA) -16%
Deere (DE) -17%
Zillow (Z) -36%
LinkedIn (LNKD) -23%
American Airlines (AAL) -31%
United Airlines (UAL) -17%
Whole Foods Market (WFM) -44%
Anadarko Petroleum (APC) -22%
Exxon Mobil (XOM) -13%
Chesapeake Energy (CHK) -37%
Macy’s (M) -10%
Amazon (AMZN) -24%
Viacom (VIA) -21%
This is by no means an all encompassing list. I’m sure you have many names you follow that would slide into this group. I tried to just snag a cross section of many sectors. You know the sectors that have held up well as well as the stocks that have as well. Some of those were even hit today, Microsoft (MSFT) comes to mind.
Financials are holding up fairly well. One could argue that the domestic recovery must be at least stable if financials are not selling off aggressively. Even Citibank (C) which one could argue is an emerging market bank is not that far off from its highs.
Some of the above names have been quite loved at different points in the year. The airlines come to mine, General Motors, remember when all the bad headlines were baked in?
The big question is, have we been correcting and these stocks as well as ones like them are ready to lead us back to new highs? Or were these name telling us all along that a large pullback was coming and while these may not have too much further to go, the market overall, does.
There’s really no way to know without more clarity, specifically on Europe. Is it possible that Ford sandbagged some guidance on analyst day to give their new CEO Mark Fields a clean slate? Alcoa CEO Klaus Kleinfeld said this week that while Europe is weakening, “It’s not as bad as some have made it out to be.” Maybe that was a reference to one of his biggest customers?
Regardless, we won’t know for sure if we’ve reached a bottom for days, possibly weeks after it has occurred. My suggestion is focus on some names that have already sold off tremendously. Some of the above names are pretty attractive right here.
I bought F (Ford) today at $13.71. That’s just about a dime off the 52-week low…for now. At that price Ford yields about 3.6% and trades at….let’s stop right there.
Ford is dirt cheap if they come anywhere close to their own guidance for next year. Clearly that guidance is in doubt or it wouldn’t be so “cheap”. Before I go into why I was happy to get long this morning, let’s take a look at what could go wrong.
Recently, Ford told us that things are not well in Europe and Latin America. Previously, outgoing CEO Alan Mullally said that the worse in Europe was over. That doesn’t appear to be the case. Ford said it will hit the low end of its previously stated margin guidance, somewhere around 8%. That started the stock on a precipitous decline. Now 8% margins are hardly a disaster, but the fact that Europe and Latin America soured and Ford didn’t anticipate it, one can certainly question the validity of their overall global guidance.
What else? Well, North American auto sales may have peaked. The annual run rate is now approaching 17 million vehicles. That’s high. It’s possible sales have hit a high here at home. It’s a risk a shareholder has to consider without question.
Finally, a worldwide slowdown or domestic recession wouldn’t be good news for any industrial, let alone Ford. But at some point, are not many of these risks priced in?
Behold, the F-150
Followers of the auto-industry know all about the F-series. It’s Ford’s cash cow. It’s basically the iPhone for Ford. If the F-series doesn’t sell, Ford would have serious problems, like real serious. Like, testimony in front of congress serious.
Despite of the golden goose performing well, Ford has decided to “blow it up”. Looking forward to a government mandated 50 mpg fleet requirement by 2025, Ford wants to revamp the F-series today, not tomorrow, TODAY.
The aluminum F-150 which will debut shortly has been in the works for almost 5 years. Mullally, formerly of Boeing was an easy sell on aluminum from all reports. Mark Fields, Mullally’s top lieutenant at the time and current CEO came around shortly thereafter and spearheaded the effort according to most people.
Now it’s make or break. Can an aluminum truck hold measure up to the F-series standard? Ford is promising fuel economy close to 30 mpg without sacrificing towing capacity in any way. It all sounds great and the company has done some exhaustive testing.
I would urge you all to read this piece in Fortune Magazine about the “gamble.”
Rather then rest on its laurels, Ford is innovating. Instead of trying to squeeze every nickel out of the current F-series, they are rolling the dice and possibly risking the future of the franchise. I think that’s outstanding and the company will be rewarded for this for years to come.
This is the same sort of foresight that kept Ford out of bankruptcy and out of a bailout from the U.S. government. I think the new F-150 can tow any losses from Europe and Latin America making the risk reward too good to pass up.
The expanded thoughts of Cramer's Shirt...micro blogger, contributor, average Joe....or Jim in this case.