Ford Motor Company: A Great Deal On An American Original
I’m always on the lookout for a great deal. My wife says I’m cheap… I prefer the term “economical”. But let’s not split hairs.
Like most people, I just don’t like paying more for something I can most likely get cheaper somewhere else. Now don’t get me wrong, I’m not one of those crazy coupon clippers who stocks up on 50 tubes of toothpaste just because it’s half price at the grocery store.
But I do check around when it comes to making a big purchase. If I want something, you can bet your bottom dollar I’m going to find the best deal possible.
And the same goes when it comes to investing for the long haul…
For example, a few months ago I was searching for stocks to add to my wife’s retirement account. Since I specialize in commodities and the energy sector, I always have my eye on a bunch of basic materials stocks. So I was tempted to just throw a few of my favorite oil stocks in there and call it good.
But this time I decided to venture outside my area of expertise.
And boy am I glad I did…
You see, I found a company that could be one of the best buys in the market right now. And I’m salivating over the company’s attractive valuation metrics.
More on that in a minute…
First, let me tell you what company is now proudly owned in my wife’s retirement account… Ford Motor Company (F).
That’s right, the American stalwart that’s as down-home as hot apple pie is a fantastic long-term buy right now.
Now, maybe you’re rolling your eyes at the thought of investing in the once-bloated US automaker. After all, it wasn’t too long ago the company was knocking on death’s door. But before you reflexively dismiss the idea, just hear me out.
Ford has a lot of good things happening right now…
After the brush with bankruptcy a few years ago, Ford CEO Alan Mulally reinvented the company. Most importantly, he revamped Ford’s vehicle lineup.
And the changes are having a huge affect on sales.
Ford’s February US sales jumped 14% year-over-year… well above analyst estimates for a mere 9% yearly gain. Of course, some of that strength has to do with the revival of the US economy and a more confident consumer.
But no matter the reason, the fact remains- Ford’s sales are gaining steam. And they’re growing not only here in the US, but overseas as well. In fact, Ford’s China sales are growing at an even quicker pace than in the US… up 28% year-over-year in February.
No question about it, surging global sales make a compelling case for the stock.
But the best part is… Ford shares are deeply undervalued.
If you’re a long-term value investor, everything about Ford screams buy right now. Shares are trading at a mere 7.5x this year’s earnings estimate. That’s cheap. The S&P 500 index trades at a much higher 13.1x earnings.
And that’s not all…
Ford’s also undervalued relative to its peers, whose average P/E is 12.9x. Just to come in line with the auto industry average, Ford would need to rise to $18.96. That’s upside potential of nearly 50%!
And the best part is… even if Ford shares stay right where they are, you’ll still get paid.
That’s right, Ford re-instituted their dividend payment a few months ago. At 1.5%, it’s not as big as some of the other dividend darlings in the market, but it’s certainly nothing to shake a stick at.
Bottom line…
If you’re looking for great a bargain to add to your long-term investment portfolio, Ford Motor Company should be at the top of your list!
Category: Stocks
