Can Ford Motor Company (F) Rev Up Its Engines?

Within the automotive community, Ford Motor Company (NYSE:F) has a few colorful nicknames — perhaps the most common one is “Fixed Or Repaired Daily,” but there’s quite a few I haven’t heard before. These include, “Found On Road Dead,” “Funky Old Rebuilt Dodge” and “Fast Only Rolling Downhill.”

Ford Stock: Can Ford Motor Company (F) Stock Rev Up Its Engines?

To be fair, Ford has rolled out some whoppers, like the Taurus or unfortunate variants of the Mustang.

Ford stock has also failed to deliver the goods in a consistent fashion. Like the automaker’s beautiful and deliciously exotic GT supercar, F stock is capable of serious performance.

Just look at the company’s response in the aftermath of the 2008 global financial crisis. At the epicenter, F shares fell well below $2. In fact, it got dangerously close to being a sub-dollar investment when Ford stock closed at $1.26 on Nov. 19, 2008.

But from the depths of perdition, the iconic car manufacturer got back to work. Its “can-do” American spirit saw F stock jump from $2.29 on the last day of 2008 trading to $10 exactly one year later. If that’s not a recovery, I don’t know what is. Still, the markets have little respect for past achievements.

To play off of a campy Ford advertisement, have you traded F shares lately?

Ford Stock as a Tech Play

The natural reply to such an inquiry would be, is there a reason to buy Ford stock? Those that have a bias against the company might have a difficult time to with it. Some folks are rabid fans of domestic auto makers like General Motors Company (NYSE:GM) and Fiat Chrysler Automobiles NV (NYSE:FCAU). Just go to a NASCAR race and you’ll see what I’m talking about. Warning — some of these photos can’t be unseen.

All joking aside, InvestorPlace contributor Will Ashworth has made the most important reason why investors should bother with F stock. Ford is dedicated to the integration of cutting edge technology into their vehicles. This was pretty clear when CEO Mark Fields recently announced that the company “was investing $1 billion over the next five years to grab majority control of Argo AI, a Pittsburgh-based company that specializes in artificial intelligence and the development of self-driving cars.”

Essentially, this means that Ford, and by extension, Ford stock, is a technology investment. And thank the motoring gods for that because the competition is stiff. Nowadays, it’s no longer just domestic gear-heads that are diehard brand loyalists. Foreign makers like Toyota Motor Corp (ADR) (NYSE:TM) and Honda Motor Co Ltd (ADR) (NYSE:HMC) have their own fanatical base.

But the best part about this tech strategy is that F shares are really good at it. Another development in the pipeline is their voice recognition algorithm. This innovation aims to be a comprehensive driver assistance program by detecting your emotions and responding accordingly. If you’re angry, your car can tell you a joke. If you’re tired or distracted, features can be activated to help you stay alert.

It’s further confirmation that Ford is serious about this transition.

Same Game, Different Name for F stock?

However, for every argument, there is a counterargument. Certainly, F stock isn’t without its critics. InvestorPlace contributor Dana Blankenhorn simply cuts through all the corporate jive and gets down to brass tacks. According to his assessment, Ford stock is still an automotive investment at its core. And even worse, it’s still focused on big, American gas guzzlers.

Blankenhorn writes that contrary to public overtures, “Ford’s strategy has not really changed, Trump or no Trump. The plan has always been to make more expensive, low-mileage cars in the U.S. while exporting production of cheaper, high-mileage cars to places where labor costs are lower. It just so happens that, for now at least, American buyers love their gas-guzzlers.”

Based on consumer demand, the company is presently focused on mid-sized truck and SUV production. They’re even bringing back the Bronco, which gained notoriety thanks to one O.J. Simpson. There’s nothing wrong with getting in while the going’s good, but the risk is that too much leverage towards one category of vehicles could leave F shares vulnerable to market risk.

Furthermore, this idea of chasing Tesla Inc (NASDAQ:TSLA) is rather optimistic. Blankenhorn notes that Tesla already has 70% of the market capitalization of Ford stock despite producing less than 1% of Ford’s output. No matter how you look at it, those are pretty tough challenges.

Bottom Line for F shares

Ford stock, F stock
Click to Enlarge
Source: Source: JYE Financial, unless otherwise indicated

For that, I’m going to refer to the technicals. The linear trend line for Ford stock since 1990 definitely has a bullish trajectory. Admittedly, the context is one of extreme highs and extreme lows.

Also, the momentum has waned substantially in recent years. For example, the returns of the past three years average an unacceptable -2.7%, and the stock is down over 16% in that time.

Still, I think the technicals demonstrate that investors are willing to give Ford stock a fair shake. There were ample opportunities for the bears to do serious and lasting damage and it hasn’t happened yet.

More critically, the shift in business strategy isn’t just words — they’re putting their money where their mouth is. I’m sure buyers of F shares are enthused about that.

Finally, people need to give the Donald Trump administration a chance. The former real estate mogul ran a tough and directed campaign specifically for working class America. In a way, Trump’s presidency will rise or fall based on F stock. So as challenged as it may be, Ford has distinct tailwinds that will make it worth your while.

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2017/02/ford-motor-company-f-stock-reignite/.

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