• Aug 16, 2006

An analyst with Bear Stearns delivered an interesting assessment of the domestic automakers today, stating that Ford's credit rating deserves a boost on the basis of its upcoming expected turnaround performance. The stock's rating was cranked up two notches from "underperform" to "overperform", and indeed its value has enjoyed an increase of nearly 15 down from its peak in the last year).

General Motors, on the other hand, is viewed as having reached its peak in the near term, and was knocked down from "overperform" to "peer perform". That automaker's stock is up 50% since the beginning of the year on the basis of GM's turnaround efforts, but that ride is considered to be mostly over, and any further gains are now viewed as being incremental and tied to sales results.

Also interesting is Bear Stearns' strategy towards making money from domestic automaker stocks. Instead of looking for returns from holding onto the stocks over the long term, the firm looks to shift its money around as the restructuring cycles roll through Detroit.

[Source: Marketwatch]



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