Shares of Ford (NYSE:F) are a lot like sugar cookies. They aren’t expensive and hey, it’s a long time until dinner. Meanwhile, there’s little nutritional value and the blast of sugar isn’t healthy. F stock, these days, is more like a cheap cookie without the sweet taste.
But investing your money is serious. Investors lured by the historic name and shares priced like a fast-food combo meal should consider cashing out.
If you can get past the mouth-watering sweets on display, there are valid reasons why investors should resist the temptation of buying F stock at this time. They include:
A consumer shift.
Executive turnover.
Loaded with debt.
Consumer Behavior Has Changed
To put it simply, Ford wants the driving public to be addicted to a sugar high.
The company needs consumers to carry years of high payments to drive an expensive vehicle that will lose value startlingly fast. Ford went all in on this strategy in 2008. That’s when it decided to be an SUV and truck company. Officials hope this grab for higher-profit vehicles will carry Ford long enough to catch competitors that are better poised for the future.
Load Error
This move comes as Ford’s market share fell in that last seven years from 19% to 14%.
Meanwhile, along came the novel coronavirus. Millions of people lost their jobs. Many of those still with jobs began working from home and they love not commuting.
In addition, during the age of Covid-19, activities and gatherings are curtailed. People are getting used to not going out as much and far fewer are making long trips on the road or by plane. This could be the case even after vaccine protection is achieved.
Therefore, the trend is not appealing for Ford, which frankly needs people to be employed and confident enough to buy new vehicles. Optimistic pundits contend Ford’s new versions of the Bronco, Mustang and F150 will draw eager customers. But will that be enough?
Turnover at the Top
F stock was crushed like a host of others by the novel coronavirus sell-off earlier this year. But remember those shares weren’t exactly soaring when the Covid-19 pandemic hit.
I don’t think it is a coincidence that Ford CEO Jim Hackett is retiring in October. Judging by the stock price, his three-year tenure has not inspired Wall Street. Hackett’s stint followed Mark Fields, a who also was CEO about three years.
The succession of CEO departures (four since the Great Recession) does not inspire confidence in investors or board members. Hopes are high for the next CEO, Jim Farley, who brings a good track record into the executive suite.
Ford needs clear vision and effective-but-stable leadership to match these difficult times.
Debt Is a Drag
Seeing an automaker carrying a significant debt load is nothing new. Making vehicles is an expensive proposition, not to mention toting loans made to consumers so they can buy those vehicles. But as InvestorPlace’s Thomas Yeung pointed out recently, Ford has a big debt problem.
Ford’s situation spotlights how decisions can impact a company several years later.
Unlike General Motors (NYSE:GM), Ford did not declare bankruptcy in the Great Recession. Many respected the company’s ability to avoid that fate, but the debt Ford took on then is being felt now. GM got rid of debt and restructured.
The difference in current share prices (about $7 for Ford and $29 for GM) may not tell the whole story, but the comparison is instructive.
Bottom Line on F Stock
Ford needs the economy to hum until it can execute a strong pivot to meet future transportation needs.
Investors, though, want to put their money to work. And F stock just isn’t measuring up. Yes, it is cheap. That’s the market’s verdict on its worthiness. There are plenty of other companies that fare better with less risk.
If you bought Ford shares around the sell-off, I agree with those who say take your profits. Along those lines, if the stock dips back to the depths, maybe jump in and hope for another climb.
Larry Sullivan is a veteran journalist in Florida who has covered banking and finance for several years. He is a former investing editor at U.S. News & World Report in Washington D.C. At this writing, Larry Sullivan does not own a position in any of the aforementioned securities.
Gallery: The Top 8 Penny Stocks to Buy for August Uncertainty (InvestorPlace)
Folks, the disconnect is real. Ordinarily, if the federal government decided to turn its back on the American people, you’d expect massive chaos to filter up into every sector of society. While you see some protests on the streets, Wall Street fat cats are having a jolly good time. So is seemingly everyone else that hasn’t had their lives destroyed. I wouldn’t fight it. Instead, you might want to consider some penny stocks to buy. Here’s the deal — we’re in an unbalanced world where stocks are up, gold is up and left-for-dead pharmaceutical and biotechnology firms are suddenly the toast of town. In the meantime, millions of Americans face eviction as relief programs and moratorium have expired. Clearly, we’re in a new normal for the investment markets. According to NPR, GDP “shrank at an annual rate of 32.9% in the second quarter.” Not surprisingly, this is the worst recorded economic contraction in U.S. history. Bizarrely, though, Wall Street is still holding out hope for an eleventh-hour save. But while we’re in this crazy zone, penny stocks levered to a believable narrative could fly higher. A few pointers though. These are incredibly risky propositions. Don’t think of them as investments, but rather pulls on the slot machine. Typically, people go to Las Vegas to have fun. If they win some money, great. If not, whatever. That’s the attitude you’ll need for these eight penny stocks to buy: Tonix Pharmaceuticals (NASDAQ:TNXP) Zomedica Pharmaceuticals (NYSEMKT:ZOM) Electrameccanica Vehicles (NASDAQ:SOLO) Ideanomics (NASDAQ:IDEX) Red White & Bloom (OTCMKTS:RWBYF) American Lithium (OTCMKTS:LIACF) Fosterville South Exploration (OTCMKTS:FSXLF) XpresSpa Group (NASDAQ:XSPA) Also, you’re better off not holding these names in perpetuity. If you already secured a handsome profit, you should probably leave. These companies’ valuations can skyrocket or plummet on little or even no news. Plus, they’re susceptible to manipulation. But if you understand the risks, here are eight penny stocks to buy this month.
Penny Stocks: Tonix Pharmaceuticals (TNXP)
Statistically, there’s no denying that exclusively focusing on and then holding penny stocks indefinitely is not the best strategy. However, the novel coronavirus changed the game for the biotechnology arena, at least while we’re in this crisis. That said, many of these penny stocks have already skyrocketed, making them riskier propositions. Nevertheless, if you want to try your hand at a biotech coronavirus play, you may want to consider Tonix Pharmaceuticals. Before the pandemic, Tonix specialized in repurposed drugs for addressing conditions associated with the central nervous system, such as pain, neurology, psychiatry and addiction. To be fair, that business hasn’t really helped TNXP stock over the years. Then came the Covid-19 pandemic and a strategic collaboration with Southern Research for a vaccine. Last month, TNXP stock jumped on tremendous investor sentiment, although shares have since dialed back some of their gains. For the brave contrarian, this presents an opportunity. From my perspective, TNXP appears to be forming a bullish pennant formation, suggesting nearer-term upside. Also, a vaccine would do much to help lift our economy. Still, with so much competition in the space and Tonix being late to the game, I would think like a day trader: Get in, get out.
Zomedica Pharmaceuticals (ZOM)
When the Covid-19 crisis first struck the U.S., people did what came natural to them — they panicked. Immediately, the hoard rushed into Costco (NASDAQ:COST) or Kroger (NYSE:KR) stores, buying up Clorox (NYSE:CLX) disinfectants and tons of toilet paper. But what about your four-legged friends? That’s a question that Zomedica Pharmaceuticals may answer, perhaps not for this outbreak, but for future epidemics. In recent weeks, Zomedica has generated headlines for its Truforma veterinary diagnostics platform. Pet diagnostics could be a huge market post-pandemic because pet owners are now more aware of risks to their furry family members. Worryingly, the U.S. Department of Agriculture released a report suggesting that pet owners with Covid-19 could spread their illness to their pets. Thus, while many medical equipment firms are scrambling for quick and convenient human tests, in the future, animal diagnostics could soar in demand. If so, this would bode well for ZOM stock. Let me be clear — Zomedica is not a Covid-19 test for pets. What I’m suggesting is that the need for pet diagnostics has become apparent. Therefore, ZOM stock could be a name that you may hold a bit longer than other risky penny stocks. Nevertheless, be very careful and perform your due diligence.
Penny Stocks: Electrameccanica Vehicles (SOLO)
As you well know, electric vehicles have surged in popularity. However, many contrarians don’t want to buy Tesla (NASDAQ:TSLA) because of its meteoric premium. Instead, they’re looking at EV upstarts like Electrameccanica Vehicles. Now, I’m going to be blunt with you. When I first got a good look at its EVs, I couldn’t help but laugh. Electrameccanica’s flagship Solo is a one-seater car. The idea is that with the new normal, people need a convenient and energy-efficient way to get to work. That’s because very few people carpool. Therefore, when you drive a car — whether regular or EV — you’re wasting space. So far, so good for SOLO stock. At the same time, a one-seater car is inconvenient. If it were such a great idea, you’d think that other automakers would have jumped on it already. Plus, as InvestorPlace contributor Chris Markoch points out, the Solo is technically a motorcycle. This could translate to higher insurance premiums and potentially, licensing restrictions. However, the catalyst for SOLO stock further down the line could be its other, more practical and aesthetically appealing EVs. As well, shares have tremendous appeal to speculators right now. With SOLO perhaps forming a bullish pennant, this thing could fly. But as with all penny stocks, be careful how you approach this.
Ideanomics (IDEX)
The universal appeal of penny stocks is that the underlying marketing message is usually attractive. If you want a great example of this dynamic, just watch The Wolf of Wall Street. For a lot of these over-the-counter names, this dramatized true tale is uncomfortably valid. And this might be the case for Ideanomics. According to its website, Ideanomics focuses on “facilitating the adoption of commercial electric vehicles and developing next generation financial services and Fintech products.” Sounds great. These are all relevant businesses. But how legitimate are these claims? That’s a question some short-seller firms have investigated, including the notorious Hindenburg Research. Hindenburg claims that Ideanomics’ boasts about its business are largely a façade. Of course, Ideanomics denies the charges, leading to bitter — and sometimes vulgar — disputes between bulls and bears over IDEX stock. I don’t want to step into this ugly mess and speak one way or the other about the fundamentals. But technically, IDEX stock has found a robust support line around the $1.25 level. Plus, with the frenetic support that Ideanomics has, it’s not inconceivable that shares move higher. So, if you do take a gamble, do so with money you can afford to lose. And make sure you get out while you can. Penny stocks can go higher for no reason, but they can just as easily fall down on the same premise.
Penny Stocks: Red White & Bloom (RWBYF)
When it comes to penny stocks levered to cannabis, three factors come to mind: Canada’s legalization, several U.S. states legalizing marijuana for either medicinal or recreational purposes and the 2018 Agriculture Improvement Act, which legalized cannabidiol (CBD). However, these factors haven’t panned out so well across the board, making this sector suspect. Still, if you can tolerate some volatility, you may want to consider Red White & Bloom. What makes RWBYF stand out from the competition is that the underlying company is a multi-state operator (MSO) with a strong presence in Michigan. One of the main challenges of being an MSO is marketing. Simply, what appeals to a patient or consumer base in one state may not apply in others. And several companies have found huge challenges in Michigan. But that’s also the opportunity in RWBYF stock. According to Michigan’s Marijuana Regulatory Agency, its freshly minted recreational industry could hit nearly $1.5 billion by the end of 2021. That’s a huge influx, and better yet, Red White & Bloom essentially levers first-mover advantage. As per usual with penny stocks, only gamble with money you can afford to lose.
American Lithium (LIACF)
With so much enthusiasm for electric vehicles, it’s only natural that the underlying commodity, lithium, has attracted tremendous interest. No matter what, the lithium market is volatile, forcing conservative investors to elect mining companies with an established track record. However, penny stocks in this space offer the most explosive potential. So, if you want to gamble on this market, you may want to have a look at American Lithium. Its claim to fame is a promising and underdeveloped lithium sedimentary basin near Tonopah, Nevada. Better yet, this is only a three- or four-hour drive away from the Tesla Gigafactory. As you might notice, there is no revenue backing LIACF stock. Basically, this is a mergers-and-acquisitions play. In an email to me, Andrew Bowering, founder and director of American Lithium, stated: “The lithium space is going to see M&A activity for certain as its such a new industry. With the lithium ion battery only recently being in high demand, there is very little traditional industry supporting mechanisms such as long term pricing contracts, futures contracts, metal trading houses, well established research and trend analysis, etc., that the small to intermediate developers can’t get big bank funding to develop themselves. Either battery producers, or battery end users, will be forced to vertically integrate or the major industrial mineral miners, and even petroleum companies, will joint venture or acquire newly discovered and economically determined lithium assets.” Currently, LIACF stock appears to be forming a bullish pennant formation, suggesting nearer-term upside. Again, do your homework and gamble responsibly.
Penny Stocks: Fosterville South Exploration (FSXLF)
As our nation falls into one crisis after another, I think it’s prudent for investors to consider gold. I’m not talking about Alex Jones levels of gold. Just enough to diversify your portfolio. If you want to speculate on the yellow metal, now’s a good time to consider penny stocks. With gold prices hitting fresh records, sentiment is very strong — and it isn’t limited to the gold bugs. And those who wish to live dangerously may want to consider Fosterville South Exploration. The company gets its name from the Fosterville area, which according to its website is the world’s highest grade and lowest cost gold mine. Further, the mining firm has three high-grade gold projects in this area. This alone may pique your interest in FSXLF stock. In addition, the fundamentals — and the emotions, if I’m being totally transparent — are incredibly supportive of gold. Writing to me via email, Bryan Slusarchuk, president and CEO of Fosterville South Exploration, stated: “Gold has acted as a global currency for thousands of years because it is finite and cannot be printed. Paper money right now is being printed around the world with reckless abandon and with no regard to capital savers in society and this inherently makes gold as a currency more valuable every day. As a hedge against uncertainty, gold also plays a crucial function and I am hard pressed to think of a more uncertain global reality than today.” I couldn’t agree more. If you’re of the same mindset, you may want to bet on FSXLF stock. Still, do your homework and understand what you’re doing.
XpresSpa Group (XSPA)
On the surface, XpresSpa Group has an incredibly relevant business. While the world waits for a vaccine, we need robust testing. We especially need testing in high-contact areas like airports. What’s interesting about XSPA stock is that the underlying company made a sharp pivot, converting its airport spa and wellness centers into Covid-19 testing sites. As I stated earlier, I admire the rapid transition in the face of an unprecedented calamity. However, I’m skeptical about the longer-term viability of XpresSpa’s pivot. Let’s set that aside for right now. At this point, the markets are discounting risk factors for several penny stocks if they’re levered to a practical solution to the pandemic. As far as I’m aware, XSPA stock is the only trade directly linked to airport testing. Thus, so many people have latched onto this narrative and are pushing shares higher. Clearly, I underestimated the enthusiasm. Do not be surprised if XSPA jumps higher in the next week or so. However, I would caution against an indefinite hold here. Airport testing would involve making sure the tests are legitimate, for one thing. Also, it may be a hard sell to the public and even airport workers. When we go through TSA security checkpoints, we have a choice between radiation or manhandling. Adding Covid-19 tests to the mix might be too much of an ask. A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he is long gold. He may consider a position in RWBYF and LIACF in the next 72 hours.On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks. Read More: Penny Stocks — How to Profit Without Getting Scammed
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