Expert: Gina Boykin - 12/9/2008

Question
today is 12/07/09 and ford closed around 3.60 a share up about 25 percent from friday. with the announcement of a gov bail out would you recommend buying this stock. my wife and i disagree. PLEASE HELP!

Answer
A government bail out in itself is not reason enough to purchase a stock.  You have to believe in the health of the company and the growth potential.  Even if the company is "saved" from bankruptcy, will the company not only continue to make money, but grow it's income?  Will the management of this company change it's outdated way of thinking, become more innovative, and begin to really meet consumer demand?  Will the company be competitive?  Unless you plan to try and time the market, the focus really should be more long-term, which means you have to look at the company, the industry, and the economy.  In general, automobile sales have declined due to the economy.  Over time, the economy will improve and sales will increase, but they will increase most for the companies that have the cars that people want (which will most likely be smaller more fuel-efficient cars).  If you believe that Ford will be one of these companies, and will not file bankruptcy in the process, then you should buy the stock.  Please note that if any of these automobile companies file bankruptcy, your stock will be pretty much worthless. Usually, a company will issue new stock when it emerges from bankruptcy.  This is one of the reasons that the price increased - a bailout will decrease the chance of the company filing bankruptcy which means the stock is more valuable than before (when the changes were higher).  I don't say all of this to scare you, but please keep these things in mind, and don't get caught up in the media frenzy when making a long-term investment decision.  Now would be a great time to take a look at the financials of the company, and their plans for improvement, since they are making them very public these days.