Still Long Ford Motor Company

THE TRUTH IS, I HAVE OWNED FORD STOCK OFF AND ON FOR SO MANY YEARS I HAVE LOST COUNT. But each time I have reached a point to get out, I am usually very well invested in the company. That simply means I am a "constant buyer" of Ford Motor Company stock. And currently where I hold those shares, I also have my dividends reinvested, and anyone who has spent any time in the markets surely understands and appreciates the power of compounding.

I won't bore you with the details of how compounding works, or the benefits of it. But you can surely look it up if you want to know what it is, and how it works FOR your investment.

I have to admit for at least the past two years I have questioned my position in Ford. I mean, the whole point to owning shares of any company is to make money, right. Not just in terms of those compounded dividends mind you. But you want to see gains as well on the underlying shares themselves.

But anyone watching Ford Motor Company stock over at least the past year knows all too well that at best, the stock has performed rather sideways. And, in my humble opinion, Ford stock has actually UNDERPERFORMED. For whatever reason it has just had difficulty getting a good footing in the stock market, and was extremely underlooked.

BUT, in many ways that also presents a bit of an opportunity. Why? Simply put, to some extent simply because the stock has been so neglected by investors, it seems apparent (and the math seems to suggest it) that based on the actual performance of the company itself, the stock has actually been—and for a terribly long time—UNDERBOUGHT.

That just simply means that if you are indeed buying shares during this period, you are getting shares at a relatively good price compared to what the real underlying value of the shares happens to be. They're just not trading there because either no one is paying attention, or no one cares.

Okay, there has been STILL some lingering trepidation from the whole bailout thing of days past that befell the auto industry in America. BUT, YOU WILL REMEMBER FORD MOTOR COMPANY NEVER GOT BAILED OUT unlike ALL others in the U.S. auto business.

GM, on the other hand, did in fact take the money offered to them in the bailout, but as far as stock performance goes they really never did suffer the same woes Ford has ever since. But that's for another day.

So why I am still long Ford even after considering selling my shares several times over the past three or four months?

I just KNOW what the stock is worth, and I tend to think that eventually so will the rest of the market. The fact is that Ford is still very low on the debt side, they have cash to spend, and they are still largely benefiting from the Mullaly days, AND from the downsizing they did, along with the renegotiations they conducted with the unions and so on and so forth.

But what was it that sealed it for me today to decide to continue to be long Ford for at least a while longer?

It was just recently announced that Ford remains the #1 seller of pickup trucks in America. The F-150 is simply, according to the buyers, the best truck on the road and the sales prove this year over year over year DESPITE THE JOKES. No truck outperforms a Ford truck. Simple as that. Otherwise, someone else in the pickup truck portion of the market would be fast on their heels. It's simply not the case, and so jokes be damned, Ford trucks are #1. Still.

But did you also know that for FOUR YEARS IN A ROW Ford is also the leader in auto sales among U.S. carmakers? It's true. They have the lead four years running. Granted, they may not have the best selling car in America. But for the past four years they have outsold in total volume the other U.S. car manufacturers.

That's not really a small deal, folks.

What's more, they have been in an ongoing effort to make their luxury line of Lincoln cars more of an experience, and they have been succeeding in doing that. Moreover, the styling of Lincoln cars is vastly improving. Although I do feel they still have some work to do here to overtake Cadillac, BMW, Mercedes, and let's not forget that MANY higher luxury lines have begun to make more strides in the marketplace to get their cars into the hands of more buyers who otherwise might not have been able to afford them.

Aston Martin for example. Certainly Mazerati and Jaguar have been doing this. Jaguar, by the way, used to be owned by Ford.

And the stock has had a recent amping up of share price. So FINALLY, after quite a long time the shares are starting to show some signs of life. Granted, that can be short lived as has been proven in the past when shares ran up to nearly $18 a share and then dropped significantly back down into the $9-$12 territory and stayed there.

But here's something else that strikes me. That's the recent passing of the new Trump tax law. Look, NO ONE else in the U.S. auto industry is better poised to take advantage of the tax breaks, and since they already have the best selling truck in America, and are the best selling U.S. car maker in America, with more and more Americans who will invariably have more money in their pockets to spend on cars, OF COURSE FORD MOTOR COMPANY IS GOING TO BE A STRONG BENEFICIARY OF THIS.

Bottom line is that I don't think Ford is out of the woods. Nor is their stock for that matter. This is a short term boost to their share price and I am not going to get ahead of myself thinking, "This is it. Now we go to the moon." But do I think Ford stock is headed for a newfound happy place? I do, and in full disclosure I am long Ford AND I intend to buy more shares within the next week.

I will be watching my Ford Motor Company stock very closely. But right now, based on what I know behind the scenes (all the math I won't bore you with), I see ABSOLUTELY NO REASON TO SELL FORD MOTOR COMPANY shares right now. In fact, I'd BUY MORE.

Okay, okay...for those who want NUMBERS! I know you are out there. By 2nd quarter 2018 I see Ford's shares being traded for just under $16 per share. So for those who AREN'T privy to the quarters, that means that I predict Ford shares will be trading at just under $16 per share by the time my 45th birthday rolls around.

THAT'S JUNE 1ST FOLKS, AND I DO TAKE PAYPAL IF ANYONE WANTS TO SEND ME A PRESENT. 

Fear not. You can use some of your proceeds from Ford's rising valuation to send me a gift.

Why The Hell Are You Still Long on Ford?

There is panic on The Street—again—when it comes to Ford Motor Company. I suppose there is at least a smidgen of reason for it. The last couple of quarters have shown a rather steep decline in auto sales, and banks continue to tighten sub-prime lending practices making it more difficult for a large segment of the population to buy new cars. But the trend is nowhere near exclusive to Ford. It's happening across the entire auto sector.

So far as I can tell, however, there is nothing that clearly indicates to me that Ford is a bust, nor that it will not pull itself—again—out of the doldrums.

Here are a couple key factors I think well support Ford's share price surviving the sell off, and maintaining itself as a strong long term investment:

• Ford has more than $28 billion in cash on the books.
• All data suggests that with an average life expectancy of the average car or truck being roughly 180K miles, support for new replacement vehicle sales remain at an average of 17 million vehicles per year.
• Ford continues to maintain very good income from sales of its trucks, really the meat of its business, and with Ford trucks being the top selling truck for the past 40+ years, they will continue to reap the rewards of sales of trucks.

Cash on the books.

Right now Ford sports a pretty hefty dividend when compared to its peers in this sector, currently a whopping 5.39%. The actual dividend is actually higher if you consider that two years in a row so far instead of increasing their dividend, Ford has opted to pay out an annual special dividend. With more than $28 billion in cash on the books, Ford is well poised to not only maintain its dividend at current levels, it is also well positioned to weather the current storm, has plenty of money for marketing, research and development, and to maintain its day-to-day operations.

Ford is nowhere near bankruptcy.

Life expectancy of vehicles.

The average service life for all vehicles is somewhere around 11.7 years considering the average mile life of a car or truck being around 180K miles. This data supports roughly 17 million new cars have to be produced each year to replace any cars on the road being tossed into the junkyard. Of course the actual annual sales figures will fluctuate due to a variety of factors. Ability of consumers to by new vehicles is certainly one of them.

And lets face it, consumer confidence data and other economic factors, while improving finally, are still not where they ought to be. Or where they can be quite frankly. This is going to have a short term impact on auto sales figures throughout the world. Although China is still a large area of growth for Ford specifically, especially when it comes to their Lincoln line of cars, it is still not enough to make a dent right now on the numbers.

Ford trucks.

So long as Ford can maintain its leading position in the market when it comes to trucks, and so long as gas remains under $4 per gallon, Ford truck sales will continue to be strong. For one thing, no one is predicting $4 per gallon gas anytime soon. In fact, it is well predicted that the oil sector will remain depressed. Initiatives by the Trump administration actually support this strongly. The more involved the U.S. in oil production, the more pressure it places on OPEC and the oil sector as a whole. That pressure can easily drive down oil prices, and keep them down for the foreseeable future. So long as fuel prices are at a reasonable level, consumers will be more inclined to buy bigger vehicles like SUVs, crossovers, and yes...

Trucks.

Let's not also forget that if there is a boost in construction—which it seems there could be—there will also be a need for more trucks in that sector. Ford will lead the job in fulfilling that demand, and since their trucks are the beef of their income, this only bodes well for Ford. It's no secret that smaller cars have never been the mainstay of Ford's business, and quite frankly, never has been for GM either.

Perhaps if we are talking about Toyota the numbers would be more meaningful if smaller car sales were in decline as they are for Ford. But we're not talking about Toyota. We're talking about Ford. The impact to Ford of even a steeper decline in their smaller car sales will not be enough to offset the revenues derived from their truck sales.

Speaking of trucks, let us not forget that Ford will bring back the Ranger in 2019, and in 2020 will bring back the very popular Ford Bronco. And let me tell you, that Bronco, based on what we know about what it will look like, may even make me—a guy who typically never buys new vehicles—to run out as soon as they come out and trade in our Ford Edge.

I think the Bronco will be a huge seller for Ford Motor Company.

My recommendation.

What I recommend is quite simple. If you are long Ford, buy the dips. If you are not long Ford you may want to wait for the stock to bottom before buying in. I would also put in high dollar amount per share sell orders to make those shares unavailable to short sellers. Short sellers cannot borrow shares that are for sale.

When you look at the balance sheets it seems clear to me that while Ford certainly suffers from, and has for some time admittedly, downward pressure, there is much to be assured that Ford has great potential for some strong upside.

I am long Ford, and continue to be long Ford. And for me, this short term sell off is only a good reason to take advantage of the discounts and add more shares. Played right, the dividends I earn alone while I wait might just be enough to, if not outright buy that Bronco when it comes out, but can at least support a hefty down payment on it.

Mark my words.