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Ford turns attractive on cheap valuations

FordThe stock of Ford Motor Company (NYSE: F) continues to remain range bound between 11.90 and 12 for the past three months. Ironically, the stock was unable to move up even after reporting fiscal 2016 third-quarter results that beat the analysts’ estimates.

Initially, the victory of Donald Trump as the next US President created jitters in the market. The automobile stocks fell sharply and Ford was not an exception. The price plunged to a low of $11.07 on November 9th . Since then, the price has bounced back to 11.90 levels. The recent developments in the automobile sector and Ford in particular indicate that the stock has just begun its uptrend.

During the election campaign, Trump had repeatedly targeted automobile companies. If voted to power, he vowed back to bring the jobs from Mexico. Ford, which is already manufacturing small cars in Mexico and runs its Brazil factory around the clock, is keeping four of its US automobile plants idle. By 2018, the company has plans to manufacture all of its small cars in Mexico. Unless the sales of F-150 truck match the production, the probability of running the US factories on a full-fledged basis is quite less.

Ford Motor Company

Ford is now setting up a technology centre in India, after having invested $2 billion to open a factory. The new Ford Bronco is going to be developed in Australia. Now, to bring back jobs, Trump may have to offer several concessions to Ford. Restrictions can hardly restrain such a giant company. So, analysts believe that Ford and several other automobile manufacturers would ultimately benefit from the Trump’s policies.

The PE ratio of 6 indicates that the stock is trading at a dirt cheap price. The current dividend yield of about 5% is also expected to attract investors. The stock will double even if we consider a short-term PE ratio target of about 13. The basis of the argument lies in the fact that most of the fundamentally sound stocks have become expensive after the recent rally. So, the investors would soon turn their attention towards automobile stocks such as Ford. Thus, we anticipate the stock to remain buoyant in the weeks to come.

The five day historic price chart indicates minor support for the stock at 11.90 levels. The stochastic oscillator is nearing the oversold zone.

Ford Stock Price: November 30th 2016

Ford Stock Price: November 30th 2016

So, a trader can purchase a high or above option (equivalent of a call option) from a suitable binary broker of choice. The price at the time of entering the contract should be about $11.90. The high option should be valid for a minimum of two days and a maximum of one week.


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