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3 Reasons to Buy Ford

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Andrew: Hi Fools, Andrew Tonner here. I'm joined today by Brendan Byrnes, our Industrials Analyst for

Brendan, let's talk about one of the most popular stocks in your sector, Ford. It's a stock that's been cheap for a long time. We've seen some decent results of late for investors, but today when you look at it what are some of the reasons an investor would buy Ford today, in 2013?

Brendan: Ford, actually a very good run-up year; below $9 a share back at the end of July, up about 50% since then, so definitely a great run for Ford. I think that's more a case of the fundamentals; just a cheap stock finally catching up with Ford a little bit here, which is great news, as a Ford investor if you're invested.

Things to watch going forward into 2013, can Ford keep that momentum? Look at operating margins; very big. The recent quarter 12% operating margins in North America, which is very, very impressive. A lot of that is driven by the F-Series truck, where they get much higher margins than their smaller vehicles.

It's certainly doing well there, but one thing to watch is GM coming out with a new line of pickup trucks that should challenge the F-Series, especially as the F-Series ... It's not necessarily stale. They're doing a good job of refreshing it, but the F-Series is toward the end of its line, and it's going to get fully upgraded the year after next.

Something to watch there, can Ford keep up the F-Series going without big incentives? They've been able to do that so far. Keep an eye on that as far as margins go. Another thing for Ford that's huge is Asia.

We know Ford has invested $5 billion there, in Asia so far. It expects to get 60%-70% of its sales growth over the next decade from Asia; clearly an incredibly important market. They're not going to get the kind of margins that they get in the United States in Asia because of joint ventures and things like that, but at the same time it's incredibly important, when we're talking about the world's biggest auto market in China, to have a great presence there.

Actually, the Ford Focus is the best-selling vehicle in the world in 2012, something that not a lot of people saw coming, so that's definitely good news as far as talking about international expansion.

Another thing is just the quality of vehicles, overall. It's a product-driven business. You have to keep an eye on quality. Ford has done very well in this regard. The Fusion, excellent car, great reviews. The Escape the same way, and we mentioned the Focus earlier, doing well.

Three things to watch there; we have to watch the competition, GM, coming back better. Not quite the product line Ford has, but Toyota and Honda are coming back really strong after the earthquake and tsunamis, taking a lot of market share back in the United States since.

Definitely watch competition here, along with Asia and along with operating margins, going into 2013.

Andrew: Yeah, three things that could be potentially huge drivers for the stock. Brendan, thank you so much for your insight. Thanks for watching, folks, and we'll see you on

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