If you take a drive down Wall Street these days, you’re gonna see lots of investors oohing and ahhing over those sleek electric vehicle companies. Never mind that none of them save Tesla (NASDAQ:TSLA) make a profit; their stocks are built for speed. Then you have the legacy automakers such as Ford (NYSE:F). Ford stock should merit an equal amount of respect. But the way investors treat it, you would think it was an Edsel or a Pinto.
If you take a more critical and mature look at Ford stock, you’ll realize it is an EV investment of sorts. While General Motors (NYSE:GM) wastes its time and reputation dealing with the disgraced likes of Nikola (NASDAQ:NKLA), Ford has moved forward with two models that prove its mettle in the burgeoning sector. Versions of their flagship models — the Mustang and F-150 pickup — have gone electric with astonishing results. (More on that shortly.)
And yet, Ford stock needs a pair of jumper cables and someone to talk some sense into its detractors. Year over year it’s up a very modest 5%. Compare that to Nikola stock, up 78% despite the scandals that forced out founder Trevor Milton. In a just world, this shouldn’t happen. But in the funhouse mirror of speculative stock picking, investor adrenaline twists everything. The question is whether the House That Henry Ford Built can convince market mavens that it’s building an assembly line to the future.
Ford Stock and the Three-Quarter Climb
While Ford stock looks meh when measured over 12 months, since March it’s been my-oh-my. The same novel coronavirus crash that punished all investments brought the big F down to $4.01 per share on March 23. But ever since, the upswing has tracked smoothly, with the stock worth twice as much today at $9.45 per share.
Analysts have also revised their earnings per share projections for Ford stock upward 17 times over the last three months. Over the last two quarters, Ford earnings trounced Wall Street projections. Yet the analyst ratings either haven’t caught up or still reek of caution. Thirteen firms call Ford stock a hold and four a buy, adding up to a consensus hold rating.
With all this comes the hope that Ford stock will restore some or all of its suspended dividend. The company was last distributed that quarterly payout of 15 cents per share on March 2. The bustle of Ford’s production lines (or lack thereof) influence this number. With auto plants set to scale up to pre-pandemic levels, expectations are mounting. At least we know this much: More EVs will roll off where gas-powered cars and trucks once exclusively ruled the roost.
Building on Beloved Brands
And what kind of vehicles would these be? Award-winning ones. On Nov. 10, Green Car Journal named Ford’s new Mustang Mach-E its 2021 Car of the Year, beating out the MINI Cooper SE, and Volkswagen ID.4. Ford’s decision to build on a beloved Baby Boomer classic with forward-thinking EV tech hits the bullseye. A boost to Ford stock? By all rights, it should be.
Speaking of tweaking a beloved brand in just the right way, Ford has unveiled a hybrid version of its F-150. In case you’re not the kind of person who subscribes to Car and Driver, the F-150 is to pickup trucks what the New York Yankees were to World Series titles in the 1940s and ’50s. It’s been tops in sales for 40-plus years and counting.
Why mess with it, you might think? Well, the hybrid F-150 was Green Car Journal’s Truck of the Year. Again, this is exactly where Ford must position itself: building on its legacy and stretching its technology, not resting on its laurels. What remains to be seen, though, is how these vehicles will sell regardless of the accolades — and in turn, impact Ford stock.
Reason to Roll With It
Recently I wrote about how Pfizer (NYSE:PFE) has defied my expectations in negative ways. Though its novel coronavirus vaccine has, oh, only been the first approved to fight the deadliest pandemic in more than a century, its stock is up less than 25 percent since Nov. 1. Far smaller biopharmas with much less chance to accomplish anything of substance have fared far, far better. It reminds me of the Ford stock-Nikola stock dynamic. For better or worse, and I’d say worse, Wall Street is treating small companies with compelling narratives far better than larger ones in the same sector, even if public-facing triumphs don’t bear this out.
This is the only reason I can think of to sidestep Ford stock. Nikola is a waste case so far as I’m concerned. But a lot of the speculators who back it anyway would laugh in my face as they laugh all the way to the bank. So too does irrational exuberance have its dark side. If a company doesn’t connote bragging rights, many investors will ignore it. Saying “I own Tesla” sounds a lot sexier than “I own Ford.”
Yet Ford stock has the goods. The herds that reek of FOMO and chase after ride-hailing losers and overhyped IPOs will learn this in time, I think. I hope. Whatever. Making money has a way of turning heads. As soon as Ford stock gets traction that the Street cannot ignore, it will attract its share of reformed lemmings. All it may take is a blockbuster quarterly report to bring the winning streak up to three.
Ford will release the results on Feb. 2. Unless you want to recycle some could-shoulda investment regret over and over a la Bill Murray in “Groundhog Day,” I’d say get ahead of the curve and make an F stock purchase. I’ll see you in the winner’s circle. Unless you see your shadow first.
On the date of publication, Lou Carlozo held long positions in TSLA and PFE.