My 2 Top Stocks: Ford and Core Laboratories

I'm glad that I do my own investments and trades, because if a broker saw the percentage of my portfolio that belongs to Ford (NYSE: F  ) and Core Laboratories (NYSE: CLB  ) , it'd probably give them a heart attack. That's how confident I was in these two stocks, and it's been a nice ride for me thus far! Even after both have seen favorable run-ups over the last few months, I still believe they both are great buys today. Let's take a look at a few factors I believe can bode well for these investments and could boost the stock prices even higher.

First up: Ford
I unfortunately don't have enough space in this article to cover all the things I love about Ford. I'll limit it to two specific factors – management and products – that show the strength of this company and why I believe it's undervalued.

In a not so distant past, Ford had to dish out massive cash incentives to move vehicles off the lot. That was because the vehicles weren't up to par, and the resale value plummeted as no one wanted to buy the vehicles without those incentives. That's not the case today, and consumers are attracted to the newer vehicles more than ever. The Fusion, Focus, and Escape are all recently refreshed and are selling extremely well. Those three will help Ford boost its market share over the next few years. It wasn't long ago that the only quality vehicle Ford produced was its F-Series truck. That, again, is not the case anymore. Consider this: Last year, Toyota recalled more vehicles than any automaker in the U.S. Second place went to Honda, at 3.3 million. Ford came in fourth, with a low 1.3 million vehicles recalled. Make no mistake, Ford's quality is gaining ground, and quickly. 

Let's take a look at Ford's management, which I consider to be one of the most important factors when choosing investments. I recently wrote why I believe Alan Mulally is worth every penny of his salary and bonuses and am glad to have him at the helm through 2014. Management has consistently made the right decisions since Mulally took the reins. With those decisions, it was able to avoid bankruptcy in 2006, return to profitability two years ahead of predictions and earn record profits. Management has put in great incentive programs to create a leaner operation. One thing holding Ford's stock back from soaring is the dim guidance for Europe. That's why I'm buying now; Ford has been through this dance before, a la the U.S. market in 2008. Management knows what works, what doesn't, and will apply that formula again in Europe. When the results comes to fruition, expect Fords stock to rise rapidly.

There's no mistaking the value and ability of Ford's management; its decisions have resulted in a drastic improvement of operating efficiencies, financials, and quality of vehicles that people now demand. It's reduced union contracts and vehicle costs, paid down massive debt and doubled its dividend. While the turnaround is complete, I highly doubt Ford has seen its brightest day – much to the delight of investors.

Next up: Core Laboratories
I bought into Core Laboratories right at the beginning of the year when the stock hovered at $105. The reason I finally made the plunge was because for once it wasn't trading at a premium. This stock is loved by many and usually trades at a high P/E ratio. When it took the rare dip, I pounced on it! Since then, it's jumped to $135 in three months and I'm going to let this great company be a foundation in my portfolio for a long time. Here are a couple reasons this stock is still worth buying.

Demand for oil is still strong; now that it's more expensive to extract black gold from the ground, companies are willing to pay Core Labs for key information on dig sites. Gone are the days where oil companies would randomly dig into the ground and find a wealth of oil. The company analyzes and tests rocks and dig sites to determine how to get the most oil out of the ground, as cheaply as possible. Without this information and expertise, oil companies risk digging too deep or using new technology at a location without enough oil to keep margins high. That's a risk most aren't willing to take.

Demand for Core Labs should remain strong. It's a very clean and strong company financially that has a great return on investments. A remarkable 17% of revenue turns into free cash flow. What's more, the company uses that cash in ways that are valuable to shareholders. It pays dividends, and has reduced its share count by more than 3% annually over the last eight years from buybacks. This company offers an intriguing play in the energy sector, with 80% of its business mix in oil and 20% in natural gas. Both fuels will play a key role in the U.S. and internationally for the distant future, and Core Labs will be there to benefit. 

Bottom line
Some investors are becoming hesitant to put money into the market after it hit its record high. While I understand this hesitation, I believe these two stocks are still very good buys. If you want to invest now, do serious homework and find undervalued companies with proven management in booming industries. Ford offers that option exactly. Don't take it from me: Morningstar recently upped Ford's fair value to $21, showing there's plenty of upside left in this stock. While Core Laboratories isn't cheap – it rarely is – it offers a great way to profit from a boom in natural gas and oil. If nothing else, be sure to follow it and take advantage of any rare dip in price.

Ford and Core Laboratories are my top two stock holdings, but Motley Fool co-founder Tom Gardner recently revealed his top two stocks as well – one that surprised me. For the names of this promising pair of companies, just click here.


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