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Morgan Stanley's 8 Best Stock Ideas for 2011

2. Ford (F) is the second-largest U.S. carmaker.

Fundamentals: Ford's 12-month sales have increased 19%. Third-quarter net income rocketed 69% to $1.7 billion. Earnings per share climbed 48% to 43 cents. Revenue declined 1.3%. The operating margin rose from 7.7% to 10%. Ford had $33 billion of cash and $117 billion of debt at quarter's end. Ford is running a shareholders' deficit. However, after enduring four consecutive quarterly losses in 2008 and 2009, it has returned to profitability.

Valuation: Ford's stock trades at a trailing earnings multiple of 9.4, a forward earnings multiple of 7.9 and a sales multiple of 0.4, 39%, 63% and 53% discounts to automobile industry averages. It's costly based on cash flow per share. Still, a PEG ratio of 0.1 represents a 90% discount to estimated fair value. Morgan Stanley's bullish target is $31, implying the stock might double.

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