Ford Motor Company (F) Stock Remains the Best Defensive Play

Ford is determined to get to the autonomous car market in 2021

They laughed when I bought Ford Motor Company (NYSE:F) a month ago. Since writing about my purchase on June 9 (having bought the shares on May 19), I admit the stock has gone nowhere. It is up less than a percent as of this writing.

Ford Motor Company (F) Stock Remains the Best Defensive Play
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That’s not why I bought. The alternative, Tesla Inc (NASDAQ:TSLA), is down 15% in that time. And I am still looking forward to a 15 cent per share dividend that, at present prices, yields 5.3%.

Ford is not for everyone. It’s not for those who see the market rising. It’s not for investors seeking fat capital gains. It’s not for plungers. It’s for defensive investors and those looking for income, period.

In the present market, that’s a good thing to be. This is a good time to be a plodder in the market.

A Ford, Not a Lincoln

Analysts are not expecting big things from Ford. For the second quarter, they expect earnings of about $1.7 billion, 44 cents per share, on revenue of $36.8 billion. The comparison is to earnings of $1.97 billion, 52 cents per share, and revenue of $36.9 billion a year ago. Yes, a down quarter.

Most analysts are sitting in the middle on Ford, calling it a “hold.” There are eight who say buy it, and two who say “sell.” They are not expecting big things, but they are not expecting earnings to fall short of the dividend, either.

Total car sales are falling, with those buyers who are in showrooms trading in compacts and sedans in favor of trucks and crossovers like my old Scion XB, which I’m still happy with after 13 years. The average car on American roads today is 11.6 years old, a record (and it’s the quality of those cars that is the reason why).

Ford’s Opportunity

New CEO Jim Hackett is trying to speed decision-making and reduce the company’s bureaucracy, replacing people with software and offering a looser style, often appearing without a tie. 

The big choice, the one Ford must get right, involves how it will deal with autonomous vehicles and the changing business model they represent. Ford wants to be in this business by 2021.  Alphabet Inc’s (NASDAQ:GOOGL, NASDAQ:GOOG) Waymo unit is said to be far ahead.

This is where I think analysts are missing the point. Yes, tech companies are closer to delivering autonomy than car companies. But they’re nowhere near delivering cars, in quantity. Ford is still a leader there.

There are more tech companies fighting for a place in autonomy than there are scaled automakers capable of applying the technology.

The technology of autonomy and the manufacturing of cars are different things. Hackett is 62, my age. He is a turnaround guy in a big hurry. He believes there’s a huge opportunity in autonomy and my guess remains that, rather than going it alone, he’s going to ally with one of the technology leaders and get into this market quickly.

This is not like the PC business. Getting to market at scale is all that matters. Tesla thinks it can deliver 1 million cars in 2020? Ford made 6.4 million cars last year.

The Bottom Line on F Stock

Ford should be able to continue its dividend through any general downturn. F stock isn’t subject to any precipitous decline. The company is well-positioned to make a good deal that gets it into the autonomous car market ahead of Tesla, and it has a CEO who was hired specifically to make that kind of deal.

With Ford, there’s safety and speculation, dividends plus the possibility of capital appreciation. In a dicey market, that’s a good place to be.

Dana Blankenhorn is a financial and technology journalist. He is the author of the historical mystery romance The Reluctant Detective Travels in Time, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in F.


Article printed from InvestorPlace Media, https://investorplace.com/2017/07/ford-motor-company-f-stock-remains-the-best-defensive-play/.

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