When it comes to driverless cars and other whiz-bang auto technologies, the presumption is that players like Apple Inc. (AAPL), Tesla Motors Inc (TSLA) and Alphabet Inc (GOOG, GOOGL) will be the big winners.
Yet the mega automakers, like Ford Motor Company (F) and General Motors Company (GM), should not be counted out. If anything, they have some key advantages, such as their global scale, deep resources and trusted brands.
Most importantly, both companies are pushing aggressively with innovation. So yes, there may be opportunities with Ford stock and General Motors stock.
The Future of Cars from GM, F
Just this week we got evidence of such moves with these automakers. In the case of F, the company has set up a new business unit called Ford Smart Mobility LCC, which will be led by the former CEO of Steelcase Inc (SCS), Jim Hackett, who is known to have extensive connections in the tech community.
The mandate is fairly broad, involving potential venture investments as well as internal development of cutting-edge technologies. Think of it as an incubator for new ideas.
Yet this does not mean that F is late to the tech game. Keep in mind that the company has built popular systems like its Ford SYNC entertainment/communications platform, which has features like remote start and unlocking of doors, detecting parking locations via smartphones, collision protection and voice controls.
Oh, and F has been doing lots of experimentation, such as with GoPark (using analytics for finding parking spaces) and GoDrive (for ride-sharing).
F also has the most autonomous vehicles on the road. Hey, they are even able to deal with snow!
GM also had some interesting news this week. The company announced the acquisition of Cruise Automation Inc., which is focused on autonomous cars. A key asset is a permit from the California Department of Motor Vehicles to test such vehicles.
But this is not the only case of M&A with GM. If anything, the company has been fairly active. To this end, GM recently invested $500 million in Lyft, which is a fast-growing ride-hailing service and purchased the assets of Sidecar (another operator in the space).
Granted, it’s still early with all this. But the good news for holders of Ford and General Motors stock is that these companies are being proactive. According to GM CEO Mary Barra, “We’re going to disrupt ourselves, and we are disrupting ourselves, so we’re not trying to preserve a model of yesterday.”
The fact is that the auto industry is in the midst of a revolution, bolstered by cloud computing, mobile and big data. This means that cars will become increasingly automated and there will likely be new business models, such as on-demand services.
As for F and GM, they are placing bets on all these key megatrends.
But might there ultimately less demand for cars, given the move towards ride-hailing? Probably. But it does seem to be a stretch that sales will collapse. Let’s face it, cars are a big part of the culture in the U.S.
What’s more, with F and GM moving into ride-hailing, they should benefit from the revenue opportunities. But there should also be monetization of in-car technologies, such as Internet access and other value-add services.
Bottom Line on Ford Stock and General Motors Stock
During the past 12 months, General Motors stock is off about 15% and Ford stock is down roughly 16%. This has happened despite strong overall auto sales, especially in the U.S.
So yes, there could be a juicy opportunity for investors. In fact, InvestorPlace.com’s Dan Burrows believes that General Motors stock looks like a pretty good bargain right now. After all, it trades at dirt-cheap five times forward earnings and the dividend yield is at an attractive 4.8%.
But Ford stock also has similar metrics, with its multiple at 6X and the dividend yield at about 4.4%.
Now, the investments that both companies are making in these new technologies will need time to take hold. But then again, this means that they are focused on sustainability and long-term growth.
No doubt, this is something that has not always been the case with the F and GM, to the detriment of its shareholders.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
