Since I began pounding the table for Ford Motor Company (NYSE:F) on May 29, shares have gone nowhere. Since I decided to eat my own dog food and bought F stock, it has merely broken even.
The company’s June earnings — net income of $2.03 billion, 51 cents per share, and revenue of $39.85 billion — were dismissed by analysts as inflated by tax law changes. I’m not worried because the earnings are more than triple the 15-cent quarterly dividend, and as I have noted repeatedly, I bought the stock as a defensive play.
That belief remains intact despite a disappointing number on July auto sales, which were released Tuesday morning. Sedan sales continue to struggle, and deals are getting harder to come by. Bring back the deals, and the numbers will rise.
There remains one great argument against my call. Why Ford instead of General Motors Company (NYSE:GM), which has been outperforming it all year and is up since January, by 3%, while F stock is down?
My answer on that comes down to two things: speed and the jockey.
Ford Can Change Fast
I first wrote positively about Ford stock before Jim Hackett became CEO, but what I said then still holds. Ford can move quickly.
Ford is now undergoing a review of its operations, deciding what it wants to do about the Indian market, about self-driving cars, and about the Lincoln brand being advertised by actor Matthew McConaughey.
Once that is finished Hackett will move. He has already done so, moving production of the Ford Focus from Mexico to China. Our Will Ashworth asks good questions about buybacks and China, but he’s impatiently looking for capital gains. I’m more willing to wait for it.
The pace of change in the car business is accelerating, and companies that can’t change strategy on a dime are going to be left behind. I don’t think General Motors can do that.
I think Ford can.
Trouble in My Valley
The second question overhanging the whole auto business is what to do about self-driving cars. I think Hackett’s experience in Silicon Valley is going to create a big win here.
Right now the autonomy boys, like Alphabet Inc’s (NASDAQ:GOOGL) Waymo business, and the car boys have been circling one another like gang members on a street corner. The autonomy boys think they have the hard job in making cars self-driving, the car boys think they have the hard job in making cars.
Tesla Inc (NASDAQ:TSLA) is pressing both sides hard, because they make cars and they are putting self-driving technology into them as fast as they can. The clock is ticking. Deals need to be made.
I think Hackett will make them. I personally think a joint-venture with Waymo would double Ford stock within a very short time, but there are other players. Once the first deal is made others will follow, and it becomes a question of execution, of control over the enterprise. Getting that right is the key. It’s a hunch on my part that Hackett will get it right.
Bottom Line on F Stock
If I’m wrong on my hunch, I am still getting 5% on my money.
Ford was last unable to earn its dividend in 2014. Given recent results, the dividend is more likely to be raised than anything else. I’ll take that over a buyback any day of the week. That should provide enough lift to F stock to keep me from losing money.
At this point in the economic cycle, with stupid policies piling up and the market’s tech leadership slowing, I’m more interested in holding what I have than making big gains. As I have said before, if I were 20 years younger I wouldn’t listen to this kind of advice, but when you get to 62, you renegotiate timelines.
Not losing, on the edge of a recession, is winning. Ford is not losing.
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 email@example.com or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in F.