Commission-free trading platform Robinhood revolutionized finance by making stock market investing more user-friendly for younger generations. The platform's list of its 100 most traded shares offers valuable insights into what companies are popular among retail investors. Ford (F -1.20%) and Walmart (WMT -0.18%) are on the list. Let's explore some reasons why they could make great buys in 2023 and beyond.
Ford Motor
Despite challenges in the auto industry, Ford Motor's long-term thesis remains intact. The company is future-proofing its revenue by pivoting to electric vehicles (EVs). And its low valuation makes it a great way to bet on this burgeoning opportunity, especially compared to pricier alternatives.
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Automakers are having trouble procuring semiconductor chips. This challenge led U.S. new auto sales to drop an estimated 8% to $13.7 million in 2022. But the semiconductor shortage is finally easing. According to experts cited by CNBC, pent-up demand for new cars could help support sales in 2023 despite the macroeconomic headwinds like inflation, rising rates, and the possibility of a recession.
For its part, Ford held up decently in 2022. Total U.S. vehicle sales dropped just 2.2% to 1.86 million. But electric cars were a massive bright spot, with volume more than doubling to 61,575 vehicles. Ford's EV strategy will depend on leveraging its existing brands, such as F-150 and Mustang, to create new EV models that can capture share in this fast-growing market.
With a price-to-earnings (P/E) multiple of just 6, Ford stock remains dirt cheap compared to Tesla, which trades for 24 times earnings. And while the older automaker doesn't offer breakneck growth, its value is undeniable. The company's transition to EVs will help ensure revenue stability in the face of changing consumer tastes.
Walmart
As America's largest brick-and-mortar retailer, Walmart's business is as stable as they come. While investors shouldn't expect spectacular top- or bottom-line growth, they also shouldn't underestimate its ability to continue creating value for shareholders.
70% of economists polled by Bloomberg expect the U.S. economy to enter a recession in 2023, which could lead to another leg downward for stocks as corporate earnings come in less than expected. Walmart is largely shielded from this headwind because of its focus on low-priced staple goods that people will still buy even when money is tight.
The U.S. grocery industry is not particularly exciting. But management is helping Walmart stay relevant through forays into synergistic opportunities like e-commerce, where its network of stores across the U.S. can serve as a springboard for efficient last-mile delivery.
With a forward P/E multiple of 22, Walmart's valuation looks reasonable compared to the market average of 20. The slight premium is justified because its safe business model could help it fare better than other companies in this uncertain economy. Management sweetened the deal through a generous buyback program that authorized the retirement of $20 billion worth of shares in November. Buybacks can increase the value of a stock by reducing the number of shares in circulation.
Which company is better for you?
With their reasonable valuations and mature business operations, Ford Motor and Walmart would both make great picks for value-oriented investors. That said, as a recession-resistant grocery chain, Walmart is undeniably the safer bet. Ford stock is cheaper. But with substantial macroeconomic headwinds this year, the automaker is best for investors who have the patience to wait for the new car market to recover and its electric vehicle transition to take shape.
