How would you like to have been the guy that bought shares of Ford (NYSE:F) when they dipped to a 27-year low of $1.01 back in November? If you were lucky enough to have made the move, a thousand-dollar investment would now be worth just shy of $7,500.

Thanks to today’s news that the company saw its first year-over-year sales increase since late 2007, shares of the company are up by about 6%.

Of course the success comes to the detriment of its recently bankrupt competitors, General Motors and Chrysler, which announced declines of 19.4% and 9%, respectively.

While the quick billion-dollar burst of the Clash-for-Clunkers plan will get all the credit from Washington, there are several factors involved in the surge in buying.

First, with bankruptcy filings now in the history books, the market is filled with much less risk and uncertainty. That means wary buyers now know who will be around next year and who will be joining the growing list of economic casualties.

Of course, Cash for Clunkers is making its mark. But only time will tell if last month’s figures are destined to become an anomaly as the funding eventually dries up and vanishes or if buyers will continue shopping even when the free money runs out.

More importantly that what is compelling buyers to head back to dealerships is the list of companies bound to profit from the government’s free money and the turnaround in demand.

Who gets my tax dollars?

Ford is obviously one beneficiary. And with the market bidding shares of the company up today, the market has already spoken its obvious bullishness for the company’ s future revenue-generating potential.

Some other companies worthy of the attention they are getting today are the big dealerships, like Sonic Automotive (NYSE:SAH). Shares of the small-cap company are up by double-digit proportions as the market re-figures the impact of several billion dollars worth of new-car buying.

With nearly 140 dealership franchises, you can bet the company’s bean counters are preparing for a few extra zeroes on the next accounting statements, especially if the Senate caves later this week and dishes another round of cash.

Of course, the nation’s automotive supply chain runs deep. Some analysts even draw it as long as the corner donut shop down the street (blame the unions).

A bit further upstream than the donut shops, look at the action at ever-volatile Dana Holding (NYSE:DAN). Shares of the parts maker are soaring by 20% today as investors rush to get in before Detroit makes a rebound that mirrors the broad market’s recent moves.

Now, before you get all jumpy thinking today’s action will continue for weeks or even months, let me explain how hype-driven investments work.

Rule number 1: It doesn’ t last.

Rule number 2: If the government is in charge, be cautious.

Rule number 3: Take your profits and run.

This message is not so much for the folks looking to get into a few goods stocks, but for the investors looking for a signal to get out.

Volatility is getting sheepishly low. It scares me.

Stocks don’t like to make broad turnarounds when everybody is looking. Instead, they do it when nobody is looking. Or, more succinctly, when presidents exclaim, “mission accomplished.”

If you want to be greedy and stick it out, you have a few more days. But in auto industry, I am a seller, especially after today’s moves.

There are simply too many other under-valued, low-risk plays to be made to be investing in an industry running on government whims.

Source: Three Winners from Cash for Clunkers

This from Today’s Financial News:

If you are a retailer, you are at the mercy of your suppliers. A bad decision by some CEO or marketing manager that you have never met will greatly affect your future profitability. The way a retailer defends his supply-chain inferiority will directly translate into his success.

Wal-Mart (NYSE:WMT) is particularly good at managing its suppliers. In fact, the mega-retailer is so good at it, it does not have to manage its supply chain. It dictates it.

Sam Walton created this power through large-volume ordering, constantly demanding the lowest prices possible and diversifying his product line. If one supplier acts up, Wal-Mart simply replaces them. And because the company sells just about every product man has ever created, Wal-Mart can afford to weather out downturns in a few of its product lines.

In other words, if one of its suppliers goes bankrupt or consumers suddenly refuse to buy a certain brand’s products, Wal-Mart’s profitability does not disappear. The company has a well-diversified product line.

If Wal-Mart and its thousands of products are the best example, car dealerships have to be the absolute worst.

One product, one shot at success

Think about it. Most dealerships sell one, maybe two brands of cars. You go to one dealer for Fords (NYSE:F), one dealer for General Motors (NYSE:GM) and another for Toyota (NYSE:T). Buyers have lots of options and industry competition is huge, but individual dealers are at the utter mercy of countless variables outside their control.

Right now, the downturn in consumer spending, the lack of credit and the notion of bankruptcy in Detroit is driving potential buyers out of showrooms. Most dealerships are in dire financial situations.

Mike Jackson, the CEO of the country’s largest dealership, Auto Nation (NYSE:AN), says at least a thousand dealers will lock their doors this year and just as many, if not more, will follow next year. The only dealers that will escape unscathed are those that were smart enough to diversify their product offerings.

For example, Sonic Automotive (NYSE:SAH), one of the nation’s top dealerships according to sales, sells over 30 different brands in fifteen states. It also owns and operates 34 body shops. If the company is going to make it through this recession, its product diversity will be the only thing that gets it there.

Unfortunately, like so many of its competitors, Sonic has a horrid balance sheet. As of last quarter, it was sitting on well over one billion dollars worth of inventory. With just $7 million in cash, it will be interesting to see how it pays for that inventory.

If the company can find the capital to get itself through this downturn, it will be able to survive. But right now, few investors are willing to take any risks in the auto industry.

When we boil it all down, Sonic Automotive, Auto Nation, and the nation’s 21,000 other dealerships are at the mercy of Detroit, which is in the hands of Washington. A lot of things have to go right before investors should think about going long on the industry.

If you are an investor looking to take advantage of the market’s downturn and snag shares of the nation’s retailers at rock-bottom prices (which is a good strategy), be sure to choose the companies with diversified offerings that are not at the mercy of their suppliers.

Wal-Mart and its index-smashing performance is a great example of the opportunities that lie ahead.

Source: Retail Bottom Fishing: Will Auto Nation(NYSE:AH) or Sonic Automotive (NYSE:SAH) survive?