Ford's Long Road: Why its Consistency Keeps me Invested

Ford Motor Company might be the biggest bear in my portfolio, yet I've held this stock off and on for over 30 years and still own shares today. Despite its lackluster performance, I believe Ford is a company worth owning, and its recent dip in share price might present a good opportunity.

I have to admit, my belief in Ford comes with a grain of salt. Nearly 20 years ago, when OneShare was a thing, I bought a share of Ford for my nephew, complete with a framed stock certificate, because he was showing interest in investing. That share cost a little over $9 back then, and today, it's trading around $11 a share.

Granted, it's not all bad. The stock has hit highs in the mid-20s over the years. But overall, it's been a sideways performer. It's also no dividend aristocrat, although you'd think it might be, having suspended its dividend in 2020 during the pandemic and only restoring it in Q4 2021. Still, with a current yield of 5.76%, the dividend offers an attractive opportunity to earn while you wait.

Generally, my approach to trading Ford has been to buy shares under $12 and sell them once they exceed $15. Rinse and repeat. Ford's historical data over the past 40+ years shows consistent cycles, so I don't anticipate any significant stock runs soon. Therefore, I view Ford as a place to simply park money for the yield and occasional gains as it presents a fair overall return beyond just the dividend.

Think of it as a "savings account with benefits." Sure, Ford could suspend its dividend again—a valid concern given their last earnings call and forward guidance, which weren't stellar despite beating top-line and earnings per share estimates. However, considering Ford's current position, I believe the dividend is safe for the foreseeable future. The recent drop in share price stems from Ford's less than impressive outlook, which didn't inspire investor confidence, leading to a 6% dip in post-call trading.

One area of concern and nervousness is Ford's EV division, which has still shown impressive growth despite the overall downward pressures in the EV market. Even though the EV division only accounts for 3% of Ford's overall business, it could still impact revenues, especially as it continues to be a loss-maker. Any significant drop in EV sales in the near future can potentially negate any strides made in more profitable areas of their business, becoming a major drag on their bottom line.

The bottom line for me is that whenever I evaluate Ford's stock, despite its perpetually stagnant share price, what stands out, at least in my opinion, is Ford's consistently strong position. Something I think many investors ignore. Over the years, management has navigated tough waters in a highly competitive market, keeping the company moving forward, maintaining impressive cash levels, and keeping debt relatively low. Even back in 2008, when the government bailed out the ailing auto industry, Ford opted out and pulled through with flying colors.

Ford's stock may never be the most thrilling investment I ever own, but I believe it continues to have value despite some forward-looking hurdles. It holds a place in my portfolio because, while it may never make me rich, I'm confident it won't make me poor either. Sometimes a steady and reliable investment, despite many ups and downs, is just what you need to balance out the highs and lows of a more volatile market. For me, Ford offers that stability, making it a worthwhile investment to continue to hold.

When I say, "Ford's not going anywhere any time soon," sure, I may be saying Ford isn't going through the roof, but I am also saying it's not going through the floor either.

Disclaimer: This information is for entertainment purposes only and should not be considered as financial advice. It is important to always do your own due diligence before making any investment decisions or to seek the counsel of a certified financial planner or other financial professional. Jim Bauer currently holds shares of Ford Motor Company stock and intends to buy more shares following the publication of this article.

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© 2024 Jim Bauer

Ford's Recent Pullback A Hiccup

WILL I SELL MY FORD SHARES NOW THAT ITS STOCK HAS RECENTLY TUMBLED? The simple answer is no. Absolutely not. Yes, they reported less in earnings in 2017 than they expected, and yes, they lowered their guidance for 2018, which sort of signals for any investor that the stock is going to enjoy another year of basically sideways trading.

A TRADING PATTERN THAT HAS PLAGUED THIS COMPANY FOR A VERY LONG TIME.

But all of the fundamental factors remain solid for Ford, and therefore I can see no reason to be a seller of the stock. There is going to come a time when investors finally get it, and when that day comes the stock will make a tailwind comeback that will be very profitable for anyone who has taken advantage of the long term sideways trend, and even the recent short term pullback in share value.

Plus, when you consider that the company is still turning a profit, and is making very good inroads in continuing to improve its brand image, and trades at roughly just 11 times earnings, I think the shares are not necessarily cheap. But they are trading at what I think is a discount to the real value of the stock.

AND SO THAT CONTINUES TO LEAD ME TO BELIEVE THAT FORD STOCK IS STILL A BUY AT THESE LEVELS.

At the end of the day when it comes to stocks, and your decision to buy, you really need to look at the balance sheets and dig deep into the earnings reports they provide, and listen carefully to what the CEOs of these companies see as the future of the company. Everything from Ford indicates that they are very forward thinking, and I think that's a good thing. And sometimes you have to read between the lines a little bit when investors react to certain announcements.

If Apple reports 100,000 less iPhones sell than expected the stock tanks even though they may have still sold a bucket ton of iPhones. And sometimes a company reports stellar news, like IBM reporting breaking a 23-quarter streak of declining revenue only to see its shares drop by 4%.

Investors don't always get it. Not the insider ones at least. But if you know what your stock's real value is, it matters little in the short term how investors react to its performance. You just have to plug along on Main Street and keep adding shares until the day comes—and it usually does eventually—that Wall Street catches up to the reality.

Ford stock will be no different. Besides, until we are otherwise told, it still also yields a hefty 6% dividend while you wait.

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.

Ford Will Have A Solid 2015

I have been saying for quite a while that I think that Ford Motor Company is an under appreciated, and certainly an undervalued stock. Nothing has changed my mind about that. The fact is that Ford Motor Company has quite a lot of good things going for it, and I believe this will help to drive the stock price towards the end of 2015 closer to the $20 valuation, where I think the valuation should be.

Among some of the key factors in my belief that Ford Motor Company should do well this year are:

• Quantitative easing in Europe which should help boost European sales and certainly help the European economy.
• Very attractive sales figures already for the new aluminum body Ford F-150.
• 24 new models released last year, which in the short term cost the company a lot, but that should boost bottom lines this year.
• A recent increase in the dividend bringing Ford's overall yield to a little over 4%, which is a sign that Ford is confident it will be profitable and can afford to continue to provide a piece of the pie to their shareholders.
• If gas prices can remain below $4 per gallon, this should also help to boost truck and SUV sales, which are the bread and butter for automakers. With the new F-150 out, I think there is no doubt that Ford will continue to maintain it's #1 position in truck sales, and may even attract a few GM and Dodge lovers over to their corner to check this out.
• Ford has been trading in a range of about $14.00 - $17.00 over the past two years. I think it can break the $17 resistance on strong sales, growth, and other factors, and once it does the stock will take off.

Overall, I think that 2015 will prove to be a very good year for Ford Motor Company investors. Even at today's prices hovering a bit over $15 per share I am a buyer. I will still be a buyer up to around $17 per share.

Disclosure: The author of this article is currently long Ford Motor Company (F) and intends to add shares within the next 30 days.

Unemployment Numbers May Drive Future Auto Sales

The unemployment numbers released today show some sign that just maybe we may be beginning to see a bit of a turnaround. Certainly the DOW Jones Industrial Average, and frankly all of the indices, have been on fire. The DOW has seen record highs.

This leads to one other thing we know. Auto sales have lagged both in the United States, and big time in Europe. All indicators point to a trend in the United States over the past 5-8 years that says that Americans in particular have been keeping their cars for longer periods of time.

When the economy stinks, who the heck can take the chance to buy a new car? Just drive what you have and run with it.

In fact, if you'd have invested in many of the auto parts companies like O'Reilly, for example, you'd have seen some pretty nice gains. People keeping their cars longer means they'll need parts to keep them running in tip top shape.

Which brings me back to the automakers. If and when, and I really think it is more a matter of when than if, the economy really starts to get some of its legs back, I think the very first thing the average American is going to do is replace their old car.

Sure, houses are nice, and the housing market has been having a pretty good run as well lately. But cars are still at the heart of every single American that drives. A new car is a treat. And if jobs numbers begin to improve, and people feel more secure in the jobs they have, and especially if the economy begins to provide less uncertainty as to where it's headed, Americans will park a shiny new car in their driveway.

It's a high ticket item, but it's not as high a ticket item as a house is. And the interest rates are still running relatively low, making any deal at the dealership even more enticing.

I am focusing on American automakers as well in this idea. I like Ford a lot. Mostly because Ford is the smaller of the Big Three US automakers, and because they have streamlined their business massively, and I think they have the most to gain with market share. Not to mention they are making some pretty nice cars.

Why American as well? I think there is a growing amount of interest in this country to buy American. We are beginning to see many more efforts by retailers to stock their shelves with American made goods. Walmart recently said it would add $50 billion over the next 10 years of American made goods. Big home improvement chains like Menards, which are all over the Midwest states, especially around Minnesota, Illinois, and Wisconsin, has been on a rampage stocking their stores with American made and regularly offering American made sale prices and incentives.

I just think that more Americans are becoming aware that in order to really seat this country back into a good economic situation, we are going to have to start putting factories back on line, and in turn Americans will have better employment choices in sectors of manufacturing, which historically paid good wages and benefits to the average American. The fact that you can have a good paying job without the need for a college degree is also a plus since more Americans working and making good money no matter their status means many more dollars will flow in the real economy, and ultimately into these American businesses.

Ford Motor Company is my top pick. But I think if you invest in any automaker right now, in 12-24 months, you'll see substantial gains. Maybe the dip in unemployment is just a short term fluke. Or it is something that signals a turnaround. Either way, I don't see this economic downturn as being a permanent thing, and like I said before, the very first treat when all is good will be a shiny new car.

And that's why I think the automakers are good buy right now.

Full disclosure: Jim Bauer currently has stock in the Ford Motor Company.