4/28/2018
Ford Motor Co NYSE: F
A company that needs almost no introduction since the production of the Model T, Ford has extended to a full line of cars, trucks, and SUVs. Except not so much the cars in North America anymore, other than the Mustang and the Focus Active. It seems SUVs and trucks bring higher margins and we all know gas prices will be low forever just like in 1977 & 2001 as noted in this graph from Energy.gov; flat as a pancake:
Ford Motor Co NYSE: F
A company that needs almost no introduction since the production of the Model T, Ford has extended to a full line of cars, trucks, and SUVs. Except not so much the cars in North America anymore, other than the Mustang and the Focus Active. It seems SUVs and trucks bring higher margins and we all know gas prices will be low forever just like in 1977 & 2001 as noted in this graph from Energy.gov; flat as a pancake:
Constant dollars are calculated using GDP inflation index, "Current" gas price is the Nominal price of regular unleaded gas.
Price at write-up $11.49
Indexes (30 & 180 day)
Vix: 15.41 (22.87, 13.84)
Ted: 57.92 (56.2, 37.69)
S&P500: 2669.9 (2605, 2854)
Target: $12.50
Valuation Ratios
Price/Earnings (TTM) . . . . .6.25x
Price/Sales (TTM) . . . . . . . 0.28x
Earnings per share . . . . . . . 1.84
Price/Book (MRQ) . . . . . . . 1.28x
Price/Cash Flow (TTM) . . . 2.70x
Held by institutions . . . . . . . 54.1%
Short interest . . . . . . . . . . . . --
Dividend . . . . . . . . . . . . . . . $0.60/5.22%
MarketCap 45.0B
Sure the phase-out won't be complete until 2022 and Stagflation is likely to have begun by that point (2020?), so I suppose there's plenty of time to reverse this bonehead move but it will leave them out of position for the next few years and unable to compete when the downturn strikes since it takes several years to develop new models.
Additionally, it isn't clear that Ford's luxury brand Lincoln will similarly cut it's sedan lines. So it's possible this may be for the best since the Ford brand carries almost no desirable sedans in a market fairly think with competition. In the past few months, executive insiders seem to be accumulating although, perhaps unremarkably Ford's Director since 1988, Edsel Ford sold 90% of his shares at the end of December 2017. Though he sold 100% of his shares in May of 2017 so it could be notable that he maintained 10%, while William Clay Ford Jr. seems to hold around a million of the shares he acquires at $2.84 for periodic non-market and direct sells.
While it's hard to find fault with the F-150 line of Trucks, it feels like Ford has been losing Market Share in other segments through the years with its uncompelling line of cars, so perhaps this move to stop creating sedans is a good move generally even if it will leave them out in the cold with a bunch of SUVs no one wants to buy when gas goes back to $4+/gallon. Such an easily anticipated gas price swing will likely once again hit their earnings and stock price and predictably take 18-24 months to at least have news of a retool to spur an associated rise in profitability (depending on how the recovery is going, company, and the car market direction). If the recovery is going well, a turn around could be an option at that time and a good entry point. Unless Electric cars turn out to be the solution everyone turns to when gas next spikes (a reasonable speculation). Short-term (6-18 months), given the cost-cutting initiative, they should see a rise in profitability. Any shorting would be better done at that time, and in another year it may be a possible short candidate but currently, I'm not interested in any F position as the only reasonable action here would be a trade with an unclear exit point. And I'd probably sell any shares I had after a small pop, just like the Ford family.
Due Diligence - TSLA, GM, TM, HMC
Price at write-up $11.49
Indexes (30 & 180 day)
Vix: 15.41 (22.87, 13.84)
Ted: 57.92 (56.2, 37.69)
S&P500: 2669.9 (2605, 2854)
Target: $12.50
Valuation Ratios
Price/Earnings (TTM) . . . . .6.25x
Price/Sales (TTM) . . . . . . . 0.28x
Earnings per share . . . . . . . 1.84
Price/Book (MRQ) . . . . . . . 1.28x
Price/Cash Flow (TTM) . . . 2.70x
Held by institutions . . . . . . . 54.1%
Short interest . . . . . . . . . . . . --
Dividend . . . . . . . . . . . . . . . $0.60/5.22%
MarketCap 45.0B
Sure the phase-out won't be complete until 2022 and Stagflation is likely to have begun by that point (2020?), so I suppose there's plenty of time to reverse this bonehead move but it will leave them out of position for the next few years and unable to compete when the downturn strikes since it takes several years to develop new models.
Additionally, it isn't clear that Ford's luxury brand Lincoln will similarly cut it's sedan lines. So it's possible this may be for the best since the Ford brand carries almost no desirable sedans in a market fairly think with competition. In the past few months, executive insiders seem to be accumulating although, perhaps unremarkably Ford's Director since 1988, Edsel Ford sold 90% of his shares at the end of December 2017. Though he sold 100% of his shares in May of 2017 so it could be notable that he maintained 10%, while William Clay Ford Jr. seems to hold around a million of the shares he acquires at $2.84 for periodic non-market and direct sells.
While it's hard to find fault with the F-150 line of Trucks, it feels like Ford has been losing Market Share in other segments through the years with its uncompelling line of cars, so perhaps this move to stop creating sedans is a good move generally even if it will leave them out in the cold with a bunch of SUVs no one wants to buy when gas goes back to $4+/gallon. Such an easily anticipated gas price swing will likely once again hit their earnings and stock price and predictably take 18-24 months to at least have news of a retool to spur an associated rise in profitability (depending on how the recovery is going, company, and the car market direction). If the recovery is going well, a turn around could be an option at that time and a good entry point. Unless Electric cars turn out to be the solution everyone turns to when gas next spikes (a reasonable speculation). Short-term (6-18 months), given the cost-cutting initiative, they should see a rise in profitability. Any shorting would be better done at that time, and in another year it may be a possible short candidate but currently, I'm not interested in any F position as the only reasonable action here would be a trade with an unclear exit point. And I'd probably sell any shares I had after a small pop, just like the Ford family.
Due Diligence - TSLA, GM, TM, HMC