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Look Beyond the Auto Industry’s Problems and Buy Ford

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In a time when the novel coronavirus wrecked the national economy, Ford (NYSE:F) shareholders have had a tough time staying in the game. It feel like every time Ford stock is ready to make a big move to the upside, disappointment inevitably follows.

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Meanwhile, Wall Street’s been bidding up electric vehicle stocks to the stratosphere. It’s enough to discourage all but the most patient Ford stock holders. Is there any hope on the horizon?

If you’re a current shareholder and you need some encouragement, keep reading. And if you’re a value hunter in search of an all-but-forgotten automaker to park your capital with, stay tuned.

By taking a closer look at Ford’s financials and future plans, the picture should start to look at little bit brighter. Just maybe, I’ll be able to convince you that this old American icon still has plenty of gas left in the tank.

A Closer Look at Ford Stock

It seems so long ago and so far away now, but Ford stock actually fell below $4 for a hot moment in March. If you didn’t get shaken out of the trade and held on to the stock, you did well because the share price stayed above $7 in early October.

That’s where the frustration sets in, however. The bulls tried really hard to get the Ford stock price above $7 and keep it there in early June. That attempt failed, unfortunately. And so, the battle line was drawn.

Other attempts to keep Ford stock above $7 took place in August and September. Yet, those price pushes were failures, as well. Will it be different this time?

The best answer to that question is that Ford stock should break through $7.50, $8 and beyond sooner or later. It might not happen this month or even this year. But that’s what’s great about buy-and-hold investing. You don’t have to try to time the market in the short term, as that’s a tough game to win.

Getting Back on Track

The market knew full well that Covid-19 would take a toll on Ford’s vehicle sales in the second quarter of 2020. Yet, since this was already a known condition, there was room for a positive surprise when Ford reported its fiscal data recently.

And indeed there was a nice surprise, at least compared to the doomsday scenarios that some folks were expecting. Thus, for the second quarter, Ford posted a mere 2% decline in retail sales.

That’s a terrific result if you compare it to the decline that one might anticipate during a global pandemic. Furthermore, when we break down the specific sales figures, we can actually start to turn optimistic on Ford’s prospects:

  • F-Series pickup sales increased 3.5% on a year-over-year basis during the second quarter
  • Retail sales of the F-Series pickup line rose 10.1%
  • Ford also posted a 8.2% increase in quarterly sales of its Ranger pickup
  • Additionally, deliveries of the Ford Expedition full-size SUVs rose 4.4% during the quarter

New CEO, New Focus

As you can see, Ford’s financial situation isn’t as bad as some people might think it is. It’s also important to realize, however, that there are major changes afoot at Ford.

According to InvestorPlace contributor Mark R. Hake, there’s an executive-level change in progress this month. In particular, Ford CEO Jim Hackett is stepping down and COO Jim Farley is taking Hackett’s position.

Don’t get the impression that this is a case of “new Jim, same as the old Jim.” You’ll likely see a revamped Ford as Farley is focused on the company’s future, not its past.

Indeed, Farley has vowed to “Turn around automotive operations, allocate capital to Ford’s strongest franchises and high-growth opportunities; produce compelling uniquely Ford electric vehicles at scale; and stand up new AV-enabled businesses.”

Addressing the last piece of that quote, Ford is collaborating with Velodyne Lidar (NASDAQ:VLDR) to develop a fully autonomous car with a focus on ride-share and taxis. We might actually see these self-driving vehicles on the roadways as soon as 2021.

The Bottom Line

As I see it, the future of Ford is exciting because this won’t be your father’s or your grandfather’s car company. Ford stock holders should remain patient as this American icon reinvents itself with a new CEO and a bold vision of value-enhancing change.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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