Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of Ford Motor Company Fell 14% in January

By John Rosevear - Feb 2, 2016 at 8:05AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares of the Blue Oval fell in a broad-based selloff of auto stocks in January. But is Ford now a bargain, or is it cheap for good reason?

What: Shares of Ford Motor Company (F 1.38%) dropped 14% in January. The Blue Oval's common stock opened the month at $13.87, and closed at $11.94 on Friday, Jan. 29.

So what: Ford was caught in a broader sell-off of auto stocks that also hit most of its key competitors' shares. Investors have expressed concern that new-vehicle sales in the U.S. may be peaking, just as China's once-roaring expansion seems to be stalling. There's also concern that established auto industry stalwarts may be at risk of "disruption" from Silicon Valley efforts to develop advanced alternatives to their products. 

In recent months, Ford CEO Mark Fields has moved aggressively to address that latter concern, announcing major investments in electrified vehicles and driverless-car technology and a new initiative that could lead Ford into the ride-sharing business. But some analysts have been skeptical of Ford's efforts, suggesting that there's more talk than action.

Now what: Ford is still generating fat profits from its mix of products in North America. Economic cycles are a fact of life in the auto business, and Ford is very well positioned to get through the next major downturn in the U.S. Meanwhile, it's still generating strong profits in Asia, and its operation in Europe has recently returned to profitability. 

Meanwhile, I think the threat of "disruption" is greatly overblown, at least in the near term. Silicon Valley darling Tesla Motors has yet to prove that it can generate a sustainable profit, and other potential rivals are at least several years way from building a single car -- assuming that they even try. 

At current prices, Ford's dividend yield is hovering around 5% -- and it's likely to be able to sustain that dividend even if the market slumps. For long-term Ford investors, there's no big reason to sell now.

John Rosevear owns shares of Ford. The Motley Fool owns shares of and recommends Tesla Motors. The Motley Fool recommends Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Ford Motor Company Stock Quote
Ford Motor Company
F
$16.55 (1.38%) $0.23

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
403%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/16/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.