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Quick Hits: Kerkorian Folds on Ford


Brief scrutiny of today's headlines.

You know there are tough times ahead for the auto industry when Kirk Kerkorian unloads 7.3 million shares in Ford (F) at a loss.

The billionaire investor sees better value in other industries, including hotels, gambling, oil and natural gas.

This suggests that Kerkorian takes the long view and is betting on a rebound. Neither hotels nor casinos will do well in the short term as people cut back in a downbeat economy buffeted by falling housing prices, tight credit and rising unemployment.

Kerkorian didn't say what sectors of the oil and gas industry interested him, but he holds about a 35% stake in Delta Petroleum (DPTR). Oil field services or infrastructure – pipelines, tankers or makers of specialized equipment – might be a good bet, too.

Kerkorian's decision to dump his shares in Ford comes about 4 months after Tracinda, his investment firm, bought 20 million of the automaker's shares, boosting his stake to about 6.5%. The purchases were announced 2 days after Kerkorian met with Alan Mulally, Ford's top dog, to discuss Ford's turnaround plan.

No matter what Kerkorian is thinking, his decision to sell will almost certainly be seen as a thumbs-down on Ford's long-term prospects. Ford's September sales were down 34% year-over-year.

Last week, Ford's falling stock price forced Kerkorian to pledge another 50 million shares of MGM Mirage (MGM) to back the $600 million credit line he used to purchase Ford shares. This didn't make much sense and Kerkorian says he plans to further reduce his stake in Ford.

Kerkorian holds about a 53.8% interest in MGM Mirage. His apparent interest in increasing his stake is almost certain to create a buzz around competitors such as Las Vegas Sands (LVS) and Wynn Resorts (WYNN).

Some analysts expect Las Vegas' 2009 revenue growth rate be off about 5% year-over-year, but that beats the recent decline in auto sales and next year's grim outlook as credit remains tight.

Kerkorian's choice of sectors for future investment seems counterintuitive, but that's why he's the billionaire, while someone else is just an ink-stained (pixel-painted?) wretch.
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