Analysis: F DIS

After you receive this Alert we will be selling 2,500 shares of Ford (F) at roughly $12.84. In addition, we will be selling 50 shares of Disney (DIS) at roughly $201.32. Following the trades, F (15,000 shares) and DIS (400 shares), will represent 5.49% and 2.29% of the portfolio, respectively.

We will be trimming Ford into today's roughly 4% strength. We have a high-quality problem on our hands with Ford. Our conviction was tested at the start of 2021 when shares traded in the mid-$8s in our Alert here, but our willingness to be patient and steadily add to our position into weakness has paid off in a very big way with the stock up about 46% year-to-date. Ford has been a fantastic stock to own, but here is our problem. The combination of this significant outperformance with the large amount of stock we own has pushed Ford's weighting in our portfolio to about 6.3%. Whenever a single position gets this big, we believe the prudent action to make from a portfolio management perspective is to lock in some big gains, free up capital to buy other stocks into weakness, and right-size the weighting so that our portfolio does not become so beholden to one name.

That being said, this sale does not reflect a change to our long-term thesis. We remain staunch believers in the turnaround being orchestrated by CEO Jim Farley. Farley and his team are aggressively restructuring money-losing regions and improving profitability and cash flow generation, focusing on selling high-quality brands like the F-150, Mustang, and Bronco, and are positioning Ford for the future by doubling down on investment in electrification and autonomous driving. We will realize a fantastic gain of about 38% with this sale.

For Disney, we are simply taking profits in this big reopening winner whose stock is up more than 10% year to date and has gained about 22% since our late January upgrade in our Alert here. Shares are up near 6% Monday on the news that California will soon allow theme parks to reopen at limited capacity. This is great news and a step in the right direction as the reopened parks will alleviate some of the company's earnings pressure, but a near 6% in a single day to new all-time highs on something the market has been largely looking towards (as part of the re-opening trade) sounds like a great opportunity to lock in gains. We'll downgrade our rating to a TWO and we will realize a fantastic gain of about 79% with this sale.