Why I Can’t Trust Ford Stock at $10 Or Any Price

Detroit has failed at every level to restore American automotive competitiveness, which bodes poorly for F stock

If you like Ford Motor Company (NYSE:F) stock or the shares of other American-automotive icons like General Motors (NYSE:GM) or Fiat Chrysler (NYSE:FCAU), you should avoid buying them anyway. In fact, I urge you to do so. I’m going to unleash hell on Ford stock, and American cars in general. If you get emotional, that’s your responsibility.

Let’s talk about why F stock has garnered significant interest lately. Since the start of this year, Ford stock has gained 32%, which is remarkable.

But  auto sales have flatlined for the last four years. Additionally, ride-share services like Uber (NYSE:UBER) and Lyft (NASDAQ:LYFT) have transformed personal transportation.

It also doesn’t help that millennials just don’t care for buying cars as previous generations did when they were young. Millennials are growing up at a time when multiple, private transportation options exist. However, it’s also true that young Americans are comparatively financially strapped.

If they’re going to buy a car, they need a reliable one. That hurts Ford because it’s not the most reliable automaker. That leads me to the first of my many unpleasant points:

American Cars Stink, and So Will Ford Stock

I just have to say it: American cars are terrible. Over the past several years, Detroit has promised it would compete effectively against the Japanese and Germans. I still remember Chrysler’s “Imported from Detroit” tagline. It was a clever, catchy piece of marketing genius.

Unfortunately, it was also pure nonsense. Part of the appeal of owning an American car is that, well, it’s American. Back in my high school days, our principal said that it’s important to buy American cars to support our economy. But it’s equally critical for domestic manufacturers to compete overseas.

I’m sure my principal’s sentiment was repeated across the nation.  The fact that people have to resort to patriotism to tout American automakers , though, indicates that American cars can’t compete on quality, reliability or attributes.

Americans Reject Their Own Cars

F stock and American cars in general are emblematic of this great nation’s many problems. They appeal to folks on a superficial basis, but are very weak when it comes to fundamentals.

Look at the politicians who supposedly “serve” their constituents. How many of them personally drive American cars when the cameras aren’t looking?  Probably very few.

Exhibit A is President Donald J. Trump. As a tall, rich, (arguably) good-looking white man with a sharp tongue, he obviously appeals to the  patriotic crowd. Today, he “drives” an American car because he has to.

But when he was just “The Donald,” he didn’t seem to care too much for domestic rides. Remember that episode of The Apprentice when he showed up in an exotic Mercedes-Benz sports car? How quickly we forget that, at one point, Trump’s most-prized automotive possessions were a Rolls-Royce and a Lamborghini Diablo!

Why, then, should I buy an American car when my own President doesn’t even exclusively buy American cars?

Hard Numbers Condemn F Stock

If you got through all that without cursing, congratulations! You probably dismissed my arguments against Ford stock as subjective reasoning. But now, we’re going to get into the numbers.

Honestly, they just don’t look good for F stock. The last time its quarterly revenue hit a peak was in June 2007. At that time, sales slightly exceeded $44.2 billion. Since then, the automaker has failed to equal that haul, despite our supposedly robust economic recovery.

Compare the malaise of Ford Motor Company stock to its fierce rival, Toyota (NYSE:TM). From an automotive perspective, I’m not a big fan of TM, either. I find their cars intractably boring. But as a business and an investment, it’s doing pretty well, despite the shortcomings of its products.

Toyota’s quarterly revenue peaked in March 2012, with a haul of just under $72 billion.Its top line has been declining ever since. The difference, though, is that TM is climbing back. Toyotas have broad appeal in Japan, the U.S., and Latin America. With its Lexus luxury brand, it’s also capturing some snobby Europeans.

Ford is doing what it does best: give up. With that kind of loser’s mentality, I just can’t trust Ford stock for the long haul.

Even a Tailwind for Ford Motor Company Stock Is Dying!

Don’t think that I’m completely biased against Ford stock. The one area where it excels is big, heavy trucks. In that area, Detroit is currently untouchable.

Sadly, though, this market is fading. Sales of heavyweight trucks last peaked in 2006, shortly before the housing and banking crises.

I’m not sure if the segment will ever regain its prior peak. The entire automotive landscape is changing. What hurts Ford stock, though, is that its Japanese and German rivals have adapted to the changes. Detroit hasn’t, which is why I don’t trust the rally of Ford stock at any price.

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/2019/05/why-i-cant-trust-ford-stock-at-10-or-any-price/.

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