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Should You Take the Wheel in General Motors Company (GM) or Ford Motor Company (F)?

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I remember stopping at a roadside gas station in Arkansas as a child and seeing a bumper sticker that read "I'd rather walk down the highway holding a Ford steering wheel than drive a Chevy." Of course, immediately next to this sticker was an almost identical one that read "I'd rather walk down the highway holding a Chevy steering wheel than drive a Ford." While my eight-year-old mind found both stickers to be hilarious and somehow profound, I wasn't sure - as the owners of a Pontiac - where my family stood in this pecking order.

Should You Buy General Motors Company (GM) Stock? 3 Pros, 3 Cons

Source: William Oliver via Flickr (Modified)

I try to be a little less tribal when it comes to investing. I'm comfortable owning both General Motors Company (NYSE: GM ) and Ford Motor Company (NYSE: F ) stock if the prices are compelling enough. (And in fact, I do own both GM stock and F stock in my Dividend Growth portfolio.) But today, we're going to do a good, old-fashioned Ford vs GM stock smack down.

GM Vs. F: Valuation

I'll start first with valuation. The entire auto sector looks cheap right now, and General Motors and Ford are certainly not exceptions.

At current prices, GM stock trades for a ridiculous 4.3 times trailing earnings and 6.1 times forward earnings estimates. F stock isn't exactly expensive, mind you, trading at trailing and forward earnings multiples of 5.9 and 7.6, respectively. But GM is the cheaper stock based on earnings.

Looking at the price/sales ratio, which eliminates some of the accounting issues that can make direct comparisons difficult, it's essentially a wash. General Motors and Ford trade for 0.35 and 0.32 times their respective annual sales.

So, in a world in which few stocks can credibly be called "cheap," GM stock and F stock are clearly exceptions. At these prices, investors are essentially pricing in years of earnings stagnation or outright shrinkage. And hey, automakers obviously have less growth potential today than they did a generation ago, particularly with ride sharing rising in popularity and the concept of a car as a service rather than an asset is starting to take shape. And the strong sales of recent years will probably take a breather. But at 4 to 6 times earnings, it's hard to argue the bad news wasn't priced in a long time ago.

Winner: General Motors

GM Vs. F: Dividend

Next, let's consider the dividends. At current prices, General Motors and Ford sport dividend yields of 4.1% and 4.8%, respectively, making both high yielders by the standards of today's market. So F stock looks ever so slightly more appealing based on the raw yield.

Of course, there is more to a dividend than just its current yield. There is also the issue of growth. Since reinstating its dividend in 2014, General Motors has already raised it 27%. Over that same period, Ford has raised its regular dividend by a smaller 20% but also paid two special dividends that collectively equal a full two quarters' worth of regular dividends at the current rate. So when it comes to dividends, Ford is the clear winner here.

Winner: Ford

GM Vs. F: Future Proofing

I'm going to skip the usual banter about whether the Chevy Silverado or the Ford F-150 sells more trucks next quarter. No, instead we're going to focus on which one of these old-economy companies is doing a better job of preparing for the future.

I'll start with General Motors. GM is looking to compete head on with the likes of electric car leader Tesla Motors Inc (NASDAQ: TSLA ) with the Chevy Bolt. Now, Tesla clearly wins that contest based on both style and performance, but the Bolt is no slouch. For drivers wanting to move beyond the internal combustion engine, the Bolt is a viable option.

But even bigger in my mind are GM's embrace of both ride sharing and autonomous self-driving cars via its partnerships with both Lyft and Uber . Last year, GM inked deals with both ride sharing companies to profit from the transformation of car transportation from a personal asset to a pay-as-you-go service.

Rather that bury their heads in the sand, GM's leaders are embracing this trend. And GM's partnership with Lyft will ideally create the infrastructure to make self-driving cars a practical reality for the masses.

Ford is making its own efforts, of course, with a goal of creating its own fleet of self-driving cars by 2021. Ford also has an electric version of the Focus. But all in all, GM seems to be doing a slightly better job of embracing the future. We're still early in the game, and a lot can happen. But for now, I'm giving the nod to General Motors.

Winner: General Motors

This gives GM the slight edge overall. Of course, no one ever said you have to choose just one. I'm currently long both and expect both to be solid performers. Though I could only make one my choice for InvestorPlace's Best Stocks for 2017 , and that distinction goes to GM stock.

Charles Sizemore is the principal of Sizemore Capital , a wealth management firm in Dallas, Texas.As of this writing, he was long F and GM stock.

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The post Should You Take the Wheel in General Motors Company (GM) or Ford Motor Company (F)? appeared first on InvestorPlace .

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


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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