David Sterman

Many of you invest right alongside me and my $100,000 Real-Money Portfolio. And since your money is at stake here, along with the $100,000 in real money that StreetAuthority has given me to invest, I'm constantly monitoring my holdings.

As some of you may have noticed, there's been some real buzz about one of my core holdings...

After a solid recent move in its stock, Ford (NYSE: F) needed to deliver a strong quarter to maintain its momentum. The just-released fourth-quarter results are a bit shy of the consensus view, and the stock is being hit by profit-taking on Friday.  [Read my original take on Ford here.]

Said another way, Ford's stock had risen 19% thus far in January, and is now up just 13%. Although the fourth-quarter holds a few potential red flags, the stock pullback is likely just a pause before the upward move resumes. That pause could last a few more months -- at least -- but investors need to focus on the long-term view and not the short-term trade. I still see this stock some 50% above current levels within 12-18 months.

A tale of two markets
As expected, Ford's North American results were quite solid. (A specific look at the numbers can be found in the widespread media coverage this stock attracts.) Also, as expected, Ford lost money in Europe. Yet European results were even weaker than I and others assumed. Simply put, European sales were weak in the first three quarters of 2011, but even worse at the end of the year.

Events in Europe will play out in one of two ways.

Sales could only temporarily stall out as consumers await the resolution of the current debt crisis. This implies at least a stabilization of sales at current levels and perhaps a modest rebound later in 2012. Ford is prepping for that scenario by sharply cutting costs in Europe right now, and management anticipates much smaller quarterly losses in Europe later this year. (Ford lost $190 million in Europe in the fourth quarter.)

In another scenario, the European debt crisis spirals out of control and consumer confidence absolutely plummets. I don't expect such a scenario, but if it plays out that way, shares of Ford would likely drop from the current $12 to around $10.

David Sterman

David Sterman has worked as an investment analyst for nearly two decades. He is currently an analyst for StreetAuthority.com

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