It seems like yesterday that we were “pounding the table” on scooping up shares of Best Ideas portfolio holding Ford (F). Of course, looking back, the transaction email alert was in May 2012 at just over $10 per share. Though that doesn’t mean much for new members, we think Ford is still a fantastic idea to gain exposure to pent-up demand related to the domestic auto recovery and global demand for auto adoption, especially in emerging markets. The speculative money is flowing into Tesla (TSLA), which to the firm’s credit is turning a lot of heads, but we think the “smart” money continues to be in Ford. Shares of Tesla are just too risky for even the most risk-seeking investor, and GM’s (GM) ongoing recalls have brought attention to potential quality concerns at the auto giant. Ford remains pristine and best-in-breed, in our view.
On April 1, Ford announced that its March US sales increased a better-than-expected 3% compared to last year. Ford Fusion posted a record sales month, while the Ford F-Series topped the 70,000-vehicle mark, advancing 5% from last year. Lincoln MKZ sales jumped 72% to achieve the best-ever record sales month. Retail sales of 166,030 vehicles represented the best March in eight years. Though the month was solid by almost any measure, we were more encouraged by the commentary, indicating that the strong pace of auto sales accelerated during the period. We think this bodes well for April, and as the weather improves across the US, for the next few months – at least as far as visibility can reasonably be assumed. Ford’s sales momentum in the US may even accelerate as negative headlines associated with massive recalls plague auto peer GM.
Valuentum’s Take
We think shares of Ford are worth north of $20 each at the time of this writing. Please always check the 16-page reports that go into the in-depth valuation analysis we perform with respect to each company. If we didn’t have such a large position in Ford in the Best Ideas portfolio already, it’d be one that we’d be looking to add to. We’re big fans of the auto maker’s potential upside.