Ford Has Had Its Day

First, let me congratulate all shareholders of Ford (NYSE: F  ) , including my brother David. He and his team recommended the stock in November 2009, and it has since risen more than 30% versus a flat return by the S&P 500. It took guts to jump into an industry in complete disarray and become an owner of Ford shares. This is a perfect example of why David is beating the market by 80 percentage points in our Stock Advisor service since its inception in 2002.

However, if I'm going to buy shares of a company valued at $39 billion, am I wrong to ask for a cleaner balance sheet and a clear view toward long-term growth? I simply can't see how Ford will beat the market from this price over the next five to 10 years. Aren't there many more companies with firmer foundations whose shares are priced more attractively than Ford after its run-up? Companies with little to no debt, or paying a dividend?

I turn to you, Ford shareholders, to guide me in the comments section below. Why would I buy Ford now when I could buy Intel or Walgreen instead? Enlighten me.

Fool co-founder Tom Gardner owns shares of Intel but no other companies mentioned. Intel is a Motley Fool Inside Value selection. Ford Motor is a Motley Fool Stock Advisor recommendation. Motley Fool Options has recommended buying calls on Intel. The Fool owns shares of Intel. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.


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  • Report this Comment On July 21, 2010, at 4:13 PM, futurefords wrote:

    The reason Ford has more room to grow, is because its all about product. Ford has a vision... not to create the cheapest automobiles, but to create and build the ones with the best value... that means great fuel economy, great styling, and great features, that starts to pay divedends in terms of great re-sale value.. and because of its endeavor to lead in quality, both short term and long term, you will see this translate in to cheaper leases, and an overall improvement in competative posiiton. Don't believe me? Let's keep track of the new Fiesta. Let's check back when Ford reports on sales data, customer satisfaction data, transaction price data, etc. If Ford can prove it to you in the small car segment, then look out for the other car segments, and truck segments.

  • Report this Comment On July 21, 2010, at 4:14 PM, LWILLS wrote:

    Sorry Tom, I can't help. I too have had a buy on Ford for a while now and have made some nice profits. But I have to say I sold all my shares this week and reinvested in Apple at $241 and BP at $35.26. I still like Ford and will buy them again (at the right price). But I think there are other sectors right now with more potential. I'll be curious to see what other Fools think.

  • Report this Comment On July 21, 2010, at 4:32 PM, mtracy9 wrote:

    "When used-car prices are on the rise, it's a sign of good times ahead for the automakers. An even more reliable indicator is 'units of pent-up demand' [information available of the Internet]. After four or five years when sales are under the trend, it takes another four or five years of sales above the trend before the car market catches up. Timing the auto cycles is only half the battle. The other half is picking the auto companies that will gain the most on the upturn. If your right about the industry and wrong about the company, you can lose money just as easily as if you're wrong about the industry." --Peter Lynch

    The U.S car industry is already 9 million cars under trend from 2 terrible years of sales. Car sales will have to increase markedly over the next few years as consumers have no choice but to replace vehicles. Ford has the best quality of any U.S. automaker.

    http://shouldersofgiantsinvestor.com/

  • Report this Comment On July 21, 2010, at 4:52 PM, smr632 wrote:

    As everyone knows, investing is tricky and it is often hard to understand what just happened and why. Ford is getting ready to release some incredible numbers, and this will be followed up with even greater numbers, as used car prices rise. Ford will hit $22.00 by the end of this year, than will settle down at about $19.00. During this period they will pay down more and more debt, and will than begin paying dividends, which will lead to a new run-up to $26.00 early next year, than settling at about $24.00.

    In a couple months, I will release additional forward information.

  • Report this Comment On July 21, 2010, at 5:32 PM, starpoper wrote:

    It depends on where you are coming from. Are you down on all auto manufacturing companies?

    The high sales of new autos in the US 4 years ago was 16 million. since then, it has been pacing 10-12 million a year. There is some assumption that there is pent up demand for autos, and it's day will come. Ford is in the catbird seat with fresh products, great gas mileage, and a good reputation. Yes, Ford has debt, yes they are demonstrating they can pay it down, yes they have new products, yes they have gained market share while keeping their pricing.

    Ford's P/E is 6.77

    Honda's P/E is 17.33

    Toyota's P/e is 44.92(wouldn't want to own that)

    we will see GM's sooner or later..

    If you are flat against the auto industry, there is nothing that will change it. If you prefer other automotive manufacturers, you will have to explain it to me because I don't get it.

  • Report this Comment On July 21, 2010, at 5:32 PM, razzamatazzer1 wrote:

    smr632 -I disagree w/your predictions..Cannot imagine how on earth you came up with those figures???

    Ford will continue flirting w/$12 until winter.Car sales are aneamic.This will continue as long as were are in this lousy economic state.I wouldn't buy Ford again until it was below $7.Then,if the economy gets better-hang on...if it gets worse-hang on.I bought a couple of years ago at 5 and sold this year at 12.Best trade I did in awhile.Look where it's at right now....flirting 12.I like the company,but not at this price in this environment with the expenses and costs and debt involved.Mullaly has done a great turn-around for this co.He is being payed accordingly.Wish other CEOs were payed accordingly instead of the ripping off they get!

  • Report this Comment On July 21, 2010, at 5:58 PM, Wesss wrote:

    Tom,

    I pay good money for your Stock Advisor newsletter, where F is currently a Best Buy.

    I'd like to know which page of the Advisor you would advise me to read- the page where you recommend F or the page where you recommend against it?

    Thanks

  • Report this Comment On July 21, 2010, at 6:29 PM, sondo1313 wrote:

    1) Industry Growth: Mulally sides with a number of analysts predicting 14M in 2011, due to scrappage, pent-up demand & demographic trends. That's +25-30%. Plus China & India. Can your drug stores bank on that?

    2) Market Share: Ford's is up 9 of 10 months. Higher in the profitable pickup segment.

    3) Product: In addition to winners Fusion, Mustang, Taurus & F-150, Ford is just now launching in high volume small and SUV segments, with Fiesta, Focus and Explorer. High quality ratings, leading Sync technology and a plan to profit on lean production. Please list all of Intel's new chips in 2010-11.

    4) Earnings, earning surprises, debt repayment and PE as already commented.

    I don't know what the next three days will bring, but real investors have to expect F to return to old highs of $14.50 and beyond in a year. Beat that.

  • Report this Comment On July 21, 2010, at 6:43 PM, badkat7 wrote:

    Intel is a one trick pony and that pony is IA (currently the i7 and Atom processors). They are determined not to diversify or take profit from associated revenue streams such as software, service or advertising. Intel excels at silicon provided you don't want an ARM based product. Problem is... ARM is the driving force for products like the Apple iPhone, iPad, HTC etc. I look for a legitimate growth indicator from Intel and there simply isn't one. Intel is managed by caretakers - not leaders. Their current surge is a direct result of people migrating from XP to Windows 7 and the power saving of Intel's superior silicon process. That's great, but not for the long haul.

  • Report this Comment On July 21, 2010, at 7:13 PM, bellrunner wrote:

    GO FORD!.......FOOL.

  • Report this Comment On July 21, 2010, at 7:37 PM, R0N0DUDE wrote:

    Why should we listen to you. Back when F was $2 a share you said you wouldn't touch it. I can't believe you get paid to right this stuff & people believe you. I bought at $1.38 and I'm holding on for the ride.

  • Report this Comment On July 21, 2010, at 8:10 PM, TMFTomGardner wrote:

    Wesss, I'm sorry for the confusion. My brother recommended Ford in Stock Advisor, and has been delighting in its return these past eight months. David and I and our teams make separate recommendations in the service. He doesn't defend all of my selections nor I his. I hope that healthy debate can help you earn better returns. Thanks for your membership and I hope you are prospering with it, Fool!

  • Report this Comment On July 21, 2010, at 8:13 PM, TMFTomGardner wrote:

    R0N0DUDE, I don't recall writing anything directly about Ford -- so I'm not sure what you're referencing. If I did and plum forgot, please remind me. I certainly do not claim to be right on every selection at every point in time. And truth is, no, I wouldn't have invested in Ford at $2 (so there...I wrote it! :). Congratulations to you on your investment. The aim of Stock Advisor is to be right on every single selection and at all points in time. It's a great aspiration -- yet, alas, one we can never achieve. But by striving, we are beating the market by 60 percentage points per pick since inception in 2002. Stock Advisor is also the largest premium investment newsletter in the world, so there are many tens of thousands of Fools enjoying it. I hope you'll reconsider and take a free trial. If you don't like what you see, you can cancel without paying a dime. Until you see it, I'm not sure your criticisms of it can have much merit. When you do, I'll except your criticisms directly to my email address at TomG@fool.com. And we hope to win your membership for life, Fool. Thanks!

  • Report this Comment On July 21, 2010, at 8:29 PM, Damntough wrote:

    Tom, is picking investments really that easy that it can be explained in one paragragh?

  • Report this Comment On July 21, 2010, at 9:36 PM, rookie2009 wrote:

    UAW for 30 yrs with GM.Retired 7/1/08...Could have tripled my money in 2 weeks when they were begging Congress. Good investment? Nope. I knew they were going down. Love being a fool. Thanks fellas.

  • Report this Comment On July 21, 2010, at 9:53 PM, invisibleinsider wrote:

    Ford should be topped out at this point. They have had good fortune using Volvo underpinnings in some of their cars, and I must admit it has worked well. The Focus started out as scrap but now has seen many mods. But the Focus is topped out. Because of no more Volvo to fall back on for technology I don't see Ford moving up. I was a GM person, their mid 90's engine and tranny's were bullet proof. Lack of updating moved my last SUV purchase to MB. Sorry GM.

  • Report this Comment On July 21, 2010, at 11:55 PM, TMFTomGardner wrote:

    Damntough, most definitely not! Great investing demands great research, great reflection, and continual management of the temperament.

    That said, the greatest investors learn to do quick work on finding what stocks to toss on the "no thanks" pile. Not comparing myself to them nor to Rembrandt, but the best investors can go through quick evaluations like Rembrandt painted canvases toward the end of his life (if only he'd had a Foolish education in money!).

    So, my quick evaluation of Ford left me feeling cold about it. I think there are better opportunities. Walgreen -- pretty compelling to me. And, of course, I reserve the right to be wrong. Have enjoyed the comments here.

  • Report this Comment On July 22, 2010, at 12:53 AM, nemo1107 wrote:

    I am currently long in Ford and will stay that way until the share price reaches $20/share. Now I know some here are bearish on this company, but this is a company that needs to be held onto for at least another 2 or 3 quarters. I don't think there is any reason why this stock couldn't be worth $15/share by the end of this upcoming quarter. They have fantastic products, and management is cleaning up the balance sheet responsibly. And when they decide to re-activate the stock's dividend, it will only help the company's cause. I'll be excited to see how the price reacts when last quarter's numbers come out tomorrow.

  • Report this Comment On July 22, 2010, at 1:52 AM, mtracy9 wrote:

    I don't see how anyone can get excited about Walgreen. When a good company, Best-Buy was putting Circuit City out of business, one could seen the trend years earlier, with Best-Buy continually producing higher profit margins and return on equity than Circuit City.

    In the case of Walgreen, it is competing directly with CVS, which has equally high profit margins and return on equity. In other words, Walgreen does not have a moat, and will not have one for the foreseeable future. It will be forced to compete on price with CVS, which will tend to keep earnings down.

  • Report this Comment On July 22, 2010, at 3:45 AM, gornywishward wrote:

    invisibleinsider, the Focus doesn't have Volvo underpinnings.

    Exactly what Technology does Ford fall back on? There might be some but not enough to worry Ford.

    Volvo are the ones to lose out in the separation, not Ford.

  • Report this Comment On July 22, 2010, at 9:29 AM, sondo1313 wrote:

    So the head of Motley Fool says he can only do "quick work" and tosses Ford in the "no thanks" pile. It's up 500% in two years, and 25+% growth is forecast for 2011. Pay attention to Motley Fool "research," "opinion" or even its headlines? No thanks. Tom...write me back in a year.

  • Report this Comment On July 22, 2010, at 11:02 AM, TMFTomGardner wrote:

    Sondo,

    I'm not sure you read the article and comments section carefully enough. First of all, Ford is a live recommendation by David, so I wouldn't throw the Fool cap out with the bath water.

    On the past performance of the stock, that's very impressive. Obviously, it came with a government bailout. Yet as I said, some of that market-beating return has been enjoyed by Stock Advisor members.

    As for writing you back in a year, where should I? Drop me an email. I'll check back in on Ford with you. But I'd prefer to follow the assessment of Ford in the column above which states, "I simply can't see how Ford will beat the market from this price over the next five to 10 years."

    So why don't I check back in 5 years, and if I'm wrong, a Guinness is on me. If I'm right, you hand me round trip tickets to Dublin. :) Deal?

  • Report this Comment On July 22, 2010, at 12:03 PM, sondo1313 wrote:

    "Obviously, it came with a government bailout."

    Hunh? There's "quick research" before writing one's stock opinion to be read by one's legions of followers, then there's, umm, just making stuff up. I don't understand why a financial writer would do that, but I give up trying to figure it out.

  • Report this Comment On July 22, 2010, at 12:41 PM, RaulChapin wrote:

    To those who don't quite understand Tom's general approach to investment, here it is in a nutshell.

    Tom is not a high risk taker. He usually points to solid companies with a possibility for large steady returns in the mid to long term.

    So it is not very useful to do a critic of his stock recomendations or dislikes without understanding the investment style used.

    BTW just because one has had profits in one investment it does not mean it is prudent for others to copy the same investment.

    You could buy a lotery ticket with the same number as the one that was the winner the previous week, and while that one ticket number made some one rich... your odds of similar profit are greatly reduced!!! :-)

  • Report this Comment On July 22, 2010, at 12:51 PM, Babble100 wrote:

    Fords are all over the roads in Europe. If they can make it here they can make it anywhere. World Car. That's the opportunity. Mullally gets it.

  • Report this Comment On July 22, 2010, at 1:03 PM, jmbring wrote:

    hey Tom,

    though sondo's comment's are a bit hostile, he does have a point - Ford didn't take direct bailout money as far as i know. maybe you're referring to Cash for Clunkers? which to me was just a small, short boost to the auto industry.

    count me as a happy SA subscriber and Ford bull. i agree with the pent-up demand theory and love how F is positioned; also agree with the post above showing Ford as a compelling value among car makers.

    to be fair, i find it hard to be 100% objective about Ford because i'm so impressed with what they've done in the past couple years, and i'm really rooting for this American icon to climb to the top. and along those lines, i'd say Toyota and GM (unwittingly, perhaps) have handed a golden opportunity to Ford.

    one last tangential comment: i personally LOVE the fact that dissent is embraced at the Fool! i think y'all should be commended for fighting a toady-type culture - it takes guts and constant effort to explain apparently incongruous information. i'm a happy benefactor of Team David AND Tom picks as a result, THANKS!

    mark

  • Report this Comment On July 22, 2010, at 1:10 PM, jmbring wrote:

    two more thoughts: i have to believe a CEO has a pretty busy schedule, if you stop and think for a second it's pretty cool that Tom G takes the time to mix it up here.

    second, it's much harder to condense your opinions and publish them for all to see than it is to read someone else's work and start shootin', fair criticism or otherwise.

    (wow, sounds like grad school in a nutshell :^) )

    mark

  • Report this Comment On July 22, 2010, at 1:32 PM, FoolishScientist wrote:

    Sondo,

    Ford did not need or take a government bailout for itself. However, if GM or Chrysler hadn't been save, then their messy bankruptcies would likely have lead to major problems with the suppliers that work with all three of the automakers. If that had led to supply problems for Ford, they probably would not have made it through without a bankruptcy of their own.

    On other notes...I do agree with Tom that the balance sheet is quite messy at this time. However, it was worse, and Mullaly and his team have been improving it steadly. I think that Ford will be able to beat the markets in the long run. Maybe not for 10 years, but probably for 3-5 years.

    Disclosure: Long Ford

  • Report this Comment On July 22, 2010, at 2:00 PM, rufianno wrote:

    I own 80% of all us stocks through a total stock market fund. thanks for pushing ford shares up.

  • Report this Comment On July 22, 2010, at 2:23 PM, KennyO wrote:

    RON0DUDE bought F at $1.38 and sondo1313 pointed out that F has 500% growth in two years. True enough but a couple points bear mentioning:

    - That kind of growth comes with especially high risk when you're looking to the future instead of to the past.

    - That growth figure presumes buying at/near the low. I haven't yet met an investor who can do that consistently or more than rarely. Claims that they've done so, yes, evidence, no.

    I've got a dog in this fight, having bought a large (for me) chunk of F after it had risen quite a bit from the low and bought more on the recent dip. I waited because at the time of the low price and for a year afterward I felt that things (macroeconomic things as well as Ford things) remained too likely to get worse instead of better. By the time the price neared $10 conditions around the company, the country and the world put the risk within the range I accept. You bet I would have liked to collect that growth from the low but at that level of risk I'm content to have missed it. If anyone would like to belittle me for that, rock on. My investment return doesn't have to beat anyone, it only has to support me in my retirement and it's doing that comfortably, thank you.

  • Report this Comment On July 22, 2010, at 2:58 PM, TMFTomGardner wrote:

    Sondo, my apologies. I meant the bailout raft of money for the industry. I do agree that Ford's hands are far cleaner of bailout cash than the other automakers and the banks. However, I think Ford would be a very different company if the bailout for the industry hadn't come through. I think the tailwinds really helped the business and stock.

  • Report this Comment On July 22, 2010, at 3:05 PM, gbudsam wrote:

    I bought Ford three times, all at under $2 as my confidence grew. I sold about 25% of it for 600% profit and plan to let the rest ride for awhile. It's house money.

    Lots of good points here about the excellent products, handling the debt well, pent-up demand, but one of the strongest factors is the great brand that has been enhanced recently. It was brilliant to avoid a bailout---you couldn't buy better PR. As a result, the public perception of this company is off the charts. Anyone thinking about buying a car these days, just about anywhere in the world, has to put Ford on their list to at least consider. It's a great positino to be in when a car mfr has the support of the public, Consumer Reports, and every other outfit evaluating automobiles and trucks.

    I am a firm believer that Ford is a long-term hold, and $40 within four years would not surprise me.

  • Report this Comment On July 22, 2010, at 5:27 PM, teentradeproject wrote:

    Wow this story doesn't feel like an advertisement at all.

    Ford is in line to aligning their balance sheet, granted it will take time, don't write Ford off. They recently made a commitment to create the top car in every class and they're getting there. Alan Mullaly is brilliant and although Ford will waver and jump around where it is now but in time it will grow.

  • Report this Comment On July 22, 2010, at 7:10 PM, stan8331 wrote:

    Ford reminds me a little bit of Apple. A once-proud company loses its way and comes close to bankruptcy, but then engineers a spectacular turnaround based on the concept of offering customers technology that simultaneously solves problems and is a real pleasure to use. I wouldn't want to NOT own at least some F right now...

  • Report this Comment On July 22, 2010, at 8:49 PM, TMFBreakerRob wrote:

    I’m a Vehicle Architect for Ford Motor. I’ve had responsibilities for a number of the products you see on the roads these days, most notably the original Fusion/Milan/MKZ. My current responsibilities include development of various vehicles….and our internal requirements for developing those vehicles…out to the end of this decade. I’d like to provide my viewpoint on why I think Ford common shares are still a fine investment.

    While an investment in Ford during the darkest days of the recent financial upheaval is now widely pointed to as one of the great opportunities of the last year or so, what reason is there to think that recent successes will be extended? Why should an investor think that this Great Destroyer of Capital has found a way to be a great creator of wealth? In an industry that historically has not performed well in this regard, how will it excell?

    What significant factors exist to suggest that Ford may outperform the S&P (or another company) over the next 5-10 years? Well, that becomes an especially complicated question as it not only requires an understanding of Ford’s potential, but that of the S&P (or that other company) as well. I won’t pursue that question….instead, let’s look at what the near future holds for Ford (I’ll keep it short):

    • The North American (NA) market is expected to rebound to some extent over the next few years and industry observers expect Ford to gain share in that growing market. Why should Ford grow share? Ford is making an intense effort to be a market leader in quality, safety, fuel economy, technology, design and value. Early results of that effort are already being lauded…and this is being coupled with a rapid roll-out of new products that will give Ford the newest NA portfolio of products among mass marketers. (Note: Independent studies have shown that showroom age is a strong predictor of market share growth.) This, coupled with strong support by Ford Credit, will result in very strong NA profits….which are key to the rest of the story.

    • In parallel with the preceding, Ford has announced a period of platform consolidation and other cost savings efforts. The upcoming results of these efforts not only provides an avenue for rapid product development, it will provide stunning savings for the company that JP Morgan says is already the mass manufacturer with the highest margins in the world.

    • What about the rest of the world? Ford currently holds a strong position in Europe, but a weaker market share in South America…and a pitiful market share in China and India…where the bulk of global growth is expected. While I obviously can’t go into details, this is going to be fixed….very rapidly. China is a huge contributor to GM profits….it will become so for Ford. So it will be with other countries.

    • So that’s nice….its still a debt laden mess, one could say. I say “Stay tuned!” Already, one investment house predicts that Ford will be investment grade in two years. Yes, the One Ford plan intends to develop a global portfolio of products, expand its market share to be significant everywhere (except Japan and Korea most likely)…..AND pay down that debt big time. And do it over the next few years.

    “OK, Rob….ASSUMING this Ford “miracle” continues….how is it going to be sustained?” I’m glad you asked!

    Ford intends to sustain its growth and its growing leadership…the same way it got to this point: by focusing on leadership in those fundamentals >> quality, safety, fuel economy, technology, design and value. Ford has recently shown industry leading increases in residual values, driven by attention to those fundamentals and witnessed by mass market leadership in JD Power quality results, major improvements in JD Power APEAL ratings and Top Picks by Consumer Reports and the Institute of Highway Safety.

    Until recently, Toyota was nervously viewed by the industry as a ferocious competitor with massive resources. That’s still true, they still have those attributes. Their relative standing is coming due for a change.

    Look out industry. Ford has finally gotten everybody working together and playing the same tune….

    We are coming to get you.

    Will a rapidly growing Ford that is shedding debt and piling on profits result in a stock price gain that exceeds that of the S&P? Well, the performance of the S&P hasn’t been so impressive over the last couple decades….but I expect that the re-emergence of Ford as an industrial, financial, marketing global colossus will result in some pretty nice returns…even for relatively impatient shareholders.

    Tomorrow, Ford will announce Second Quarter earnings. While a quarter’s performance is merely a snapshot in the ongoing saga, I would suggest that it will be worthwhile for folks to follow the story. ;) You may be impressed….

  • Report this Comment On July 22, 2010, at 9:24 PM, invisibleinsider wrote:

    gorny,

    I never stated the Focus had Volvo underpinnings, just that it has seen many mods.

    If you think Volvo got the bad end of the deal try driving Ford technology on the roads of Sweeden.

    Only an F-250 and above may survive 5 miles!!!

  • Report this Comment On July 22, 2010, at 11:25 PM, Adamu07 wrote:

    Results. David's got them, and Tom...well...he's got to learn a little more from his brother. In all seriousness, I bought into F when David recommended it. I LOVE the Stock Advisor service and will be a member for years and years to come! (And my most recent buy was NOV, so you know....I take advice from BOTH sides...)

  • Report this Comment On July 23, 2010, at 2:36 AM, baldheadeddork wrote:

    @ BreakerRob - thanks for the excellent analysis on Ford's market and product situation going forward.

    The Fool either runs hot or cold, and this piece by Tom is icy. It's not just his ignorance of Ford, it's the ignorance in the claims he uses to downgrade the company.

    Ford's balance sheet isn't that bad. All automakers - and other manufacturers of expensive, complex objects - carry a lot of debt on their books. Ford's assets to debt is just under 1:1. Boeing is barely on the other side of that ratio. Daimler is 5:4, Toyota and Nissan are 3:2. Honda, often (and correctly) criticized for being too conservative, is the best in the auto sector with a 5:3 ratio.

    Comparing any automaker with a retailer (WAG - 5:2 assets to debt) or a tech stock (INTC - 5:1) is ridiculous.

    Tom also refers to Ford's market cap of $39 billion as if it is overpriced. It's not if you take even ten minutes to review the sector. Toyota makes more cars than Ford worldwide, but the difference in market cap is disproportionate to the difference in sales, revenue, or profits. Ford's net profits, operating margins, and ROE is three times Toyota. Ford does have more debt on its books, but Toyota has the costs of the SUA recall and the damage to their reputation. I think it's crazy that Toyota is valued at 2.5 times as much as Ford.

    Let's try Honda. 20% fewer sales than Ford worldwide, almost identical net income for last year, lags F on net profit, operating margins and ROE percentages, but not as badly as TM. HMC has a market share 25% higher than Ford.

    I think you can make a pretty strong case that Ford is undervalued right now just on their financials. When you look at their position in the market, I don't know how you can say they've had their day.

    There are two more great reasons to hold this stock. First, the economy will recover by the end of this year or early next, and when it does there is going to be a lot of pent up demand for cars. Ford is not in danger of bankruptcy, so buying now (or holding) is still buying near the bottom of the sales curve for the industry.

    Second, this is an industry and a company that historically pays a dividend. I hope Ford doesn't return the dividend at least until its asset/debt ratio returns to 3:2 or better, but when it does even a modest dividend is going to equal an incredibly attractive yield at today's prices.

    Or to put it in terms Tom can understand, at the price I bought in anything over a penny a quarter will beat the yield I could get from WAG or INTC. If you buy F today, any future dividend greater than nine cents a quarter will beat those companies.

    Why shouldn't I buy Intel or Walgreens? Why the hell would you?

  • Report this Comment On July 23, 2010, at 8:11 AM, sondo1313 wrote:

    "Ford Has Its Day," is the column that could have been written by the posters here who focused on product, management, industry growth, demand, earnings, PE, etc.

    "Ford Has Had Its Day" was written by the professional finance writer who only has time for "quick analysis," yet writes the story anyway, advising his followers "no thanks." He credits Ford's phenomenal turnaround to "government bailouts" of competitors in the past, and fails to consider the future implications of the factors listed above, as the industry recovers to 14M units.

    Which writers are up 10 percent over the past three days? Whose opinion has more credibility for the coming three years?

  • Report this Comment On July 23, 2010, at 8:28 AM, TMFBreakerRob wrote:

    @baldheadeddork: I suspect Tom just wrote a deliberately provocative article to get some discussion started. It worked. :)

    By the way, if you head over to here:

    http://boards.fool.com/Message.asp?mid=28652211

    ...you can read about Ford's 2Q results. Amazing....including 2011 guidance regarding further major reductions in debt.

    After years of ineptitude, its a pleasure to see the Company on the right track. I'd never suggest its the Best Investment You Can Make, but it should deliver solid performance over the next few years...unless the economy falls off the tracks....in which case many other investments will suffer as well.

  • Report this Comment On July 23, 2010, at 9:23 AM, baldheadeddork wrote:

    Sixty-eight cents a share, beating estimates by 70%. That's a hell of a way to start a Friday. Thank you, Rob, and everyone else getting the work done at Ford.

  • Report this Comment On July 23, 2010, at 3:09 PM, Damntough wrote:

    Tom, any comments on today's earnings?

  • Report this Comment On July 23, 2010, at 3:39 PM, TMFMarlowe wrote:

    Some of us were on to the Ford turnaround story even before David recommended it for SA:

    http://www.fool.com/investing/general/2009/01/30/talk-me-out...

    But is it still a buy? The big dramatic turnaround bounce is probably well over at this point. What we have now is a cyclical industrial company that, like all cyclicals, will follow the economy's recovery (or lack thereof). Pluses for Ford are great competitive positioning in North America and (to a lesser extent) Europe and Latin America, best-in-industry management, hot product pipeline. Minuses: They're so far a weak player in China -- playing catch-up -- and while they are likely to be generating a lot of cash for the next several quarters, they do have an epic debt load to pay down. Ford stock seems likely to outperform industry peers if only because the story is so good, but it'll be at least six more quarters before we can even think about a dividend, and while the firm is out of danger (in a bankruptcy sense), the economy could still slow things down some.

    If you own Ford, it's not time to sell unless you think the economy's recovery has peaked. Is it the best stock you could buy right now? Probably not. Is it at this point a fairly conservative investment that is likely to reward shareholders as long as the economic recovery continues? I think so.

    My thoughts, worth what you paid for 'em.

    John Rosevear

  • Report this Comment On July 23, 2010, at 4:02 PM, JoeBivens wrote:

    I'd be interested in hearing David G's thoughts on Tom's article.

  • Report this Comment On July 23, 2010, at 4:31 PM, Brent2223 wrote:

    I'd be wary of counting on any pent up demand in the North American auto market. The way they were giving away financing to anyone with a pulse tells me there are alot of people out there tied to a 5 - 7 year lease/financing agreements. They won't be coming back to the market with their underwater loans. Auto makers have been increasing the product cycle this way for a while. In combination with the fact that cars last longer, outside of growth in other markets, I don't see much hope for this industry in the next 5 - 10 years.

  • Report this Comment On July 23, 2010, at 4:39 PM, golfamatic wrote:

    GM's purchase yesterday of the sub-prime finance company is hardly a business plan to drive sales. They are going to end up with alot of used inventory on their hands, and notes that won't be worth pennies on the dollar. Once the car is re-possessed, the debtor stops paying; the debtor is also probably judgment-proof.

    Mullaly is trying to build a better mouse trap every day at F; he's ready to go full throttle into China.

  • Report this Comment On July 24, 2010, at 2:16 AM, dlunas wrote:

    Damned fine conversation. I agreed with the article initially, but the conversation pointed out some interesting stuff. Thanks guys.

  • Report this Comment On July 24, 2010, at 1:06 PM, sapereaude1 wrote:

    You ever try to get from here to there in a chip?

  • Report this Comment On July 26, 2010, at 2:50 PM, naughtyguy wrote:

    talking about debt...I think GE has $1/2 trillion in debt!

    KMX is starting to open new stores again and should have a better stock price gain than Ford.

    NPD is China's largest drug store with great fundamentals. It's stock price will outperform all the US drug store stocks...(I own NPD and I'm considering buying more)

  • Report this Comment On July 26, 2010, at 9:56 PM, baldheadeddork wrote:

    John -

    Is Ford still a buy? Good question. Let me grab my SWAG hat...

    For the reasons I posted above, I think Ford is undervalued compared to other automakers. If you look at return on revenues, net profit margins, and their market share, I their market cap should be between Honda and Toyota. If Mulally makes good on the forecast for cash to exceed debt by the end of 2011, I can't think of a reason why the market valuation of the company shouldn't move up sharply.

    Based on current sales volume, I think Ford should have a market cap of ~$60-70b when the debt falls in line with industry standards. That would bring the share price to $18.

    But there's no reason to believe Ford won't continue to grow their market share in most of the world markets. In North America they clearly have the hot hand at least through 2011, and their strongest threat is GM's incentive programs. All the growth in China and India is pure bonus. And don't overlook Europe. Ford has done a great job of capitalizing on the stumbles of Opel, and that fiasco still has no end in sight. European sales are going to be down because their extended C4C program pulled a lot of sales forward, but as it rebounds Ford will be much stronger than they were in 2008.

    There is also evidence of a very strong pent up demand for new cars. Used car prices at auction are running at record highs, and that always correlates to higher new car sales six to twelve months from now. I'm not saying that we're going to get back to a 16m SAAR, but I think projections of 14m in 2012 are going to be right on the money.

    So my thoughts, worth what you paid for them, is that the low end target for Ford over the next 18 months is $18 and a decent shot at a 3% yield when the dividend is restored (10c/quarter) in 2012. Not a huge return compared to the last year, but a thirty percent return isn't chopped liver.

    If Ford continues to grow their market share without increasing incentives, that number should rise. If there is a solid recovery beginning in 2011, it should rise, too. If both of those things happen - lookout. I've got a steak dinner bet that Ford will be at $30 by June 1, 2012, and I still think I've got the better chance of winning that bet.

  • Report this Comment On July 27, 2010, at 10:47 AM, daninkeller wrote:

    Bought F at $5.65, sold at $13 the day after earnings. Will buy back at $11. Never owned one, but would buy one now. Best of breed, best to survive. Love the CEO - he's like the Jeff Bezos of cars.

  • Report this Comment On May 06, 2012, at 2:24 AM, TMFTomGardner wrote:

    I kinda feel good about this column two years later. Comparisons between Ford and the market align with my thoughts. That said, I called out underperformance over 5-10 years...so we still have more to watch with this one.

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