- Ford (F) stock is testing important support levels.
- If the markets cooperate, this risk presents a compelling opportunity.
- Investors should consider taking positions in this strong auto stock, but with caution.
Even in turbulent markets like we’ve seen lately, Ford (NYSE:F) stock is presenting investors with great opportunities.
Don’t be confused by the short-term uncertainty. Smart long-term investors do their homework when the markets panic. Warren Buffet’s company Berkshire Hathaway (NYSE:BRK.B), for example, recently invested more into Occidental (NYSE:OXY). And I contend that Ford stock is worthy of consideration for those long-term portfolios.
Now, we do need to acknowledge the types of risks that exist now. There are serious geopolitical threats from the Ukraine war potentially spreading across other nations.
There are also macroeconomic shifts that could derail the economy. These stem from a flip in central bank policies. Mainly my worry comes from the U.S. Federal Reserve, but now the European Central Bank is talking about doing it too.
Rate hikes are fine, but the hawkish tone is getting a bit too extreme. Currency markets are also reacting with big waves. The U.S. dollar’s strength could be a problem to American companies who export, like Ford. Nevertheless, there’s still hope that things will stay on track.
The F Stock Correction Isn’t Entirely Its Fault
This market-wide dip may turn out to be merely a price correction, not the end of the fundamental bullish thesis. Ford stock will recover with the indices whenever that happens.
Moreover, the auto industry is undergoing a major shift in strategy. For the first time ever, the internal combustion engine has a serious threat. The electric vehicle has finally presented itself as the next major shift. Therefore, Ford and all the other major global manufacturers have followed suit.
While this is good news for auto emissions levels, it presents major challenges to auto manufacturers. Shifting an entire global operation from one technology to another will cause inefficiencies. In other words, the profit and loss statements will deteriorate for a stint, but Ford management should be up to navigating the changes.
Tesla (NASDAQ:TSLA) has laid out the blueprint for them to follow. It was able to become the leader among electric vehicle makers. Wall Street rewarded it with extreme capital appreciation. Ford stock showed brilliance this year above $20 per share. But that high was too strained, so it corrected appropriately.
Own Some Now and Some Later
When Ford crashed in 2020 I wrote about going long when it was single digits. Now that it’s at $13, it is attractive once more.
However because we cannot trust the entire market, I would suggest that investors only initiate starter positions. The global unrest could worsen and cause more stock pain for Ford.
Averaging into a full position is an easy method for ensuring a sane overall base cost.
The profit and loss statement also needs improvement, especially if we compare it to Tesla. Ford has almost three times the sales but barely generates more and gross profit. Ford definitely has inefficiencies to sort out, but therein lies some upside potential. Short-term reports on such short-comings could also cause more investors rejections of F.
On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.