Q: What kind of shape is Ford in financially? A: They didn't go bankrupt. So that's the first step. But they've been thrown in the same tough pool as GM and Chrysler. In reality, when you look at the balance sheet, they have $26 billion of debt versus $21 billion of cash. So they are in a reasonable position. They also owe roughly $7 billion to the UAW [United Auto Workers] for their health-care obligations. But there is no near-term liquidity crunch at Ford whatsoever, and we believe that the company, given its market-share gains and the recovery in the market, will actually begin to generate pretty material cash flow in 2010 and 2011. Over time, the focus is going to be on deleveraging the balance sheet. We have a price target of 11. Last week, it was trading around seven.

Q: So it's mostly independent operators? A: The other 92% is mostly guys who own a few dealerships, so it is still very fragmented. When you look at the industry from the top down, you have AutoNation, which has about 2% of the U.S. market. It's been around for a long time. They've been able to acquire a lot of dealerships and generate economies of scale as far as its operations, and they've achieved some real cost savings above and beyond what these individual owner operators can realize. That gives AutoNation a real advantage in the market. Not in terms of buying vehicles -- each dealer is dealt with exactly the same way on pricing from the auto makers -- but on their operating costs. So they are very good operators, and they have been able, over the long term, to make acquisitions relatively inexpensively, to make those dealerships a lot more efficient, and to generate some real profits. And that's what all these other publicly traded dealerships are doing. AutoNation is almost fully mature at this point, and we don't expect them to make tons of acquisitions -- though we expect them to still make acquisitions opportunistically. Our price target is 23, compared with [the stock's] recent price of around 18.

Q: How would you rank the auto dealers in terms of investment opportunities? A: They are more alike than they are dissimilar. Our top pick from a stock perspective right now would be Group 1 Automotive, largely because of their overexposure to geographies that are doing reasonably -- such as the middle of the country and the Northeast. Our price target is 40, versus its current price of around 29. Also, they have exposure to brands that are doing reasonably well, including Toyota, Nissan Motor [NSANY], Honda and Ford.

Q: Where in particular? A: Ford [ticker: F] is our top pick, followed by the dealers, including AutoNation [AN]. There is a lot of attention paid to AutoNation, which has a market cap over $3 billion and a lot of liquidity. Two other companies we like in that space are Group 1 Automotive [GPI] and Penske Automotive Group [PAG].

Q: Let's talk about the auto dealers. Why do you like that group? A; That group includes AutoNation, Group 1 Automotive, Penske Automotive, Sonic Automotive [SAH] and Asbury Automotive Group [ABG]. These companies should benefit from the recovery in demand, and they also have strong parts and service businesses.

Q: Let's talk about the auto dealers. Why do you like that group? A; That group includes AutoNation, Group 1 Automotive, Penske Automotive, Sonic Automotive [SAH] and Asbury Automotive Group [ABG]. These companies should benefit from the recovery in demand, and they also have strong parts and service businesses.