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Ford Shares: How to Build Your Position

NEW YORK ( TheStreet) -- Shares of Ford (F - Get Report) have backed off the highs they hit earlier this month, but they're still up more than 13% this year.

Earlier this year I advised Ford investors to sell covered calls against their positions.

As with any "contrarian" call, this was met with great skepticism. Many people did not seem to understand my advice, and I took a lot of flack for it.

Ford is a great company. The fundamentals are solid. The stock was breaking out. Auto sales were perfect. So why did the stock fail to get to more than $16?

Easy. Europe.

But Ford, along with General Motors (GM - Get Report), is a rather easy stock to trade, because you never need to chase it. Let me repeat that: You never need to chase it!

Envision Ford as a boat, rather than an automaker, and picture Europe as an anchor. Anytime you begin driving a boat, it's easy going until you run out of slack on your anchor line.

Then all of a sudden the boat hits the end of that line and gets stopped. That's exactly what it's like with shares of Ford. You might see the stock run up on monthly sales figures but then sell off afterwards.

The good sales data -- or as of late, great sales data -- typically get baked into the stock price prior to the release. At this rate, a blowout number from automakers is generally expected. An in-line result or a disappointing one would send the stock right back down.

Although Ford is improving in Europe and CEO Alan Mulally still says the company is on pace to be operating with breakeven results by mid-decade, the automaker still lost more than $450 million in the region last quarter.

That's not exactly a promising figure considering it leaves the automaker on pace to lose nearly $2 billion in Europe for 2013. So by Mulally's estimates, Ford will likely lose about $1 billion there in 2014, perhaps a tad more. After all, mid-decade is a pretty broad measure.
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