The recent results from the two American car-making giants show that the domestic market is actually quite strong.
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New York, NY (PRWEB) November 07, 2012
Profit Confidential, an e-letter of Lombardi Publishing Corporation, a 26-year-old consumer publisher that has served over one million customers in 141 countries, reports that an improving automotive industry has helped both Ford Motor Company and General Motors Company (GM) experience strong short-term gains. In addition, focused international strategies from both companies point to sustained long-term growth.
In a recent Profit Confidential article, stock analyst Sasha Cekerevac notes that it’s important to look past short-term market fluctuations and focus on long-term investments. Due to a weak U.S. economy, many investors have focused on short-term opportunities. Unfortunately, this approach means investors have missed accumulating a number of excellent long-term opportunities; including the often-overlooked U.S. auto industry.
“The recent results from the two American car-making giants show that the domestic market is actually quite strong. Ford…announced quarterly earnings that beat analyst estimates. The stock not only rose 8.2% that day, but it has continued to move upward. With 19 analysts estimating $0.30-per-share earnings, Ford came in at $0.40 per share, excluding one-time items,” Cekerevac says. (Source: “Ford Advances After Outpacing Profit Estimates,” Bloomberg, October 31, 2012.)
According to Cekerevac, Ford’s long-term investment strategy has been to steer away from the European division and drive operations into stronger markets. The company expects to lose $1.5 billion in Europe in both 2012 and 2013. With European weakness expected to continue, the company’s long-term strategy is to eliminate jobs in Europe and reduce output.
“This is certainly a prudent investment strategy for the company, as the American, South American, and Asian markets are far more attractive than Europe over the next decade,” he observes.
Cekerevac states that fellow competitor GM also reported strong earnings. Going forward, he feels the company’s most interesting investment strategy is to also make dramatic cuts to its European division. GM plans on cutting $200.0 million this year alone, followed by cuts totaling $500.0 million annually starting in 2013.
“Long-term investing is about proper allocation of capital and market penetration. It appears both firms [GM and Ford] are making the hard decisions now in their investment strategy to benefit down the road,” Cekerevac adds.
While GM and Ford’s share prices popped on strong quarter results, these are not the kinds of companies that will be reporting massive quarter over quarter revenue gains. Both of these companies should be looked at as long-term investment strategies, according to the Profit Confidential analyst.
He concludes: “Considering both carmakers are now producing strong products, as well as smart cost-cutting measures, I'm sure many investors will be considering adding to positions on pullbacks over the next few years.”
Founded in 1986, Lombardi Publishing Corporation, which has served over one million customers in 141 countries, is one of the largest consumer information publishers in the world. For more information on Lombardi Publishing Corporation, and to get its popular Profit Confidential e-letter sent to you daily, visit http://www.profitconfidential.com. Or visit http://www.lombardipublishing.com/customer-service.html.