Does Cramer Still Like Ford? A Quick Analysis

Tickers in this article: F GM M MSFT

NEW YORK ( TheStreet) -- If you are long Ford , like me, you want to know why Jim Cramer and Stephanie Link, managers of the Action Alerts PLUS portfolio , sold their position in Ford earlier this week.

Some investors are likely scratching their heads, as it seemed obvious that Cramer was a big advocate of Ford.

While there are still many positives going for the automaker, there are certainly some headwinds that investors should be aware of, headwinds that Cramer may no longer wanted to be a part of.

Cramer and Link's reasoning was two-fold, as explained to more than 40,000 subscribers of AAP Monday morning:

Namely, after you receive this Alert, we'll sell out of our 6,700-share Ford position at $16.90, and initiate a 1,000-share position in a new consumer name, Macy's , at $46.50.

We initially wanted just to pare back the Ford position -- but now, given speculation that current CEO Alan Mulally might leave to join Microsoft , we don't believe the shares offer a great risk-reward scenario. Plus, we're up 10% in the position, and we'll lock in our gains.

Turning to the Macy's initiation, the risk-reward ratio here is attractive at these levels: The stock has underperformed the S&P 500 by 9% since its fiscal second quarter (ended April), and expectations are currently very low.

Overall, the fourth-quarter setup is compelling given low expectations, a healthier consumer -- oil prices are down 15% since Aug. 28 -- and strong management execution. Macy's has one of the best management teams in the industry, and we expect they will continue to focus on strong product assortment, a lean expense structure and shareholder returns. Management has done a great job at harmonizing its inventory, merchandising and buying infrastructure, and it has built out a successful distribution and fulfillment platform.

This has paid off handsomely for subscribers. Ford is only up 1.3% on the week and Macy's is up 9.6% after making new 52-week highs following a strong earnings report. On top of those returns, as noted above, they helped subscribers take home a 10% return in Ford, combining with M for roughly 20% in profits.

Not too shabby.

But does the sale mean the duo no longer cares for Ford, or are they simply avoiding the headline risk over speculation that Mulally will step down as Ford's chief exec?

To gain insight, let's do a rundown of what's going right at Ford as well as the potential setbacks.

Positive Catalysts

In its most recent earnings report, Ford raised its full-year guidance, expecting total pretax profit to surpass 2012's record year -- kind of a big deal! -- after originally expecting it to be "equal to or higher than 2012."

I would also think Ford's 2.40% dividend yield has caught some investors' attention, especially those income-oriented ones. The company doubled its dividend payout in January 2013 and I wouldn't be surprised to see some sort of increase in the two-to-five-cent range come this January.