I have decided to buy into Ford Motors Company (F) after the company’s stock has been on the fall for the last year. In my mind, the share price of the company has fallen low enough to be considered undervalued and the good fundamentals reflect this. When valuing the stock I looked at the (1) Fundamentals, (2) Future Growth Potentials, (3) Comparison against Competitors and (5) The Catalyst for the investment.
The most important fundamental of this stock is the high dividend yield of 4%. This will allow the mitigation of small losses. Aside from this, the fundamentals are very good in comparison to the market and the sector. Further research: http://finviz.com/quote.ashx?t=f. The fundamentals worth noting are the PEG ratio and PE ratio, Although the D/E and LT D/E are above ideal.
So growth in the industry has slowed as a result of the macroeconomic climate following from the financial crisis and great recession. The main area for expansion of growth in coming years is in Europe and the emerging markets for Ford which should lead higher than previous growth rates. In the US, lower gasoline prices and economic growth will also help improve growth.
I compared Ford to General Motors and Tesla. Tesla is a share that is riding on a lot of “goodwill” as well as media. Also, Elon Musk the CEO of Tesla has run into trouble as he uses Tesla to bailout his other company SolarCity. Although the Growth of Tesla is very much higher, I believe the current price has more than factored this in. General Motors on the other hand has been made more competitive in comparison after Bankruptcy Fillings allowing the company to remove a lot of its’ liabilities. The fundamentals of each stock are very attractive – if not favouring General Motors with significantly less D/E. However, I believe the growth of Ford to be more consistent as General Motors experienced very good growth the previous year. Either way both seem attractive dividend investments and should have good value in the next 1-3 years depending on how long it takes for growth rates in the industry to pick up.
The macroeconomic catalyst of this trade is the decline in revenue growth and sales in the industry. However, with the high dividends this problem should be mitigated until growth does eventual pick up. Also, “The Hampton Effect” where portfolio managers return to readjust portfolios after Labor Day with the combination of a few convoluted FED statements on the potential Fed Rate Hike have caused the market to fall 2% and Ford Motors to fall 3%.
I will review the position when the price of Ford Shares reach around $15 mark.
Lets Beat Mr. Market 