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As We Predicted, Ford Reinstates a Quarterly Dividend

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It came as no surprise last week when one of our best ideas, Ford (F) reinstated its quarterly dividend. Though the dividend payable is only 5 cents a share, it amounts to a yield just shy of 2%. In total, the dividend should cost about $800 million in 2012, with plenty of room to grow in the future. However, the dividend does not affect our fair value estimate of the company, which we still assume to be at least $20. A 2% dividend yield isn’t necessarily a reason to jump into any stock, but in the case of Ford, a 2% yield is great income for a stock that we think is worth almost double. Given the company’s inconsistent cash-flow … Read more

An Update on One of Our Best Ideas, Ford

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Best idea portfolio member Ford Motor (F) has been on a tear lately. After bottoming at $9, shares have rallied up to over $12, until they pulled back modestly. In addition to third-quarter earnings, which were reported Wednesday, a few material events have happened, resulting in the shares rallying. Though none of them change our fair value estimate, they do strengthen our conviction in the idea. Third-quarter results, so-so Let’s get the bad news out of the way. The third quarter for Ford wasn’t a disaster, but it wasn’t great either. Improving sales trends continued, with volumes up 14% for the quarter and retail market share coming in at 13.9%. Additionally, the automotive business threw off $400 million in cash flow from … Read more

Best Idea Ford Looks Set to Sign a Win-Win Labor Deal, Shares Rally 8%

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One our best ideas, Ford Motor (F), rallied nearly 8% as investors poured into a late market rally. Ultimately we think the price spike can be attributed to a few different factors, but most importantly, it looks like Ford and the UAW has struck up a deal that should be beneficial to both employees and shareholders. Although the UAW still must ratify the deal, initial terms of the deal indicate a fair agreement for employees, and a tremendous sign of confidence for the United States economy in the mid-term. Lower entry-level pay, more variable pay As expected with the precedent set with the GM deal a few weeks earlier, the new labor contract creates an entry level wage of $15.78, … Read more

We Outline Our Bullish Case for Ford

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One of the best trades of the 1980’s could be relevant again today: we love Ford   Famous investor and manager of the Fidelity Magellan Fund Peter Lynch is best known for his “buy what you know” strategy. Though Lynch did a lot more than just go to malls and buy stock in the most popular stores, occasionally the best investment opportunities are right in front of you. We think investors will have a chance to replicate Lynch’s famous auto trade of the 1980’s today with shares of Ford inexplicably tumbling towards the single digits. On a discounted cash-flow basis, we think Ford is worth $20 if we double dip into a second recession, $34 under the continued low-growth scenario, … Read more

Alcoa Sets a Positive Tone for Earnings Season

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Monday afternoon marked the unofficial start of first-quarter earnings season, as industrial bellwort Alcoa (click ticker for report: ) reported its results. For the first quarter, revenue fell nearly 3% year-over-year and 1% sequentially to $5.8 billion, just shy of consensus estimates. Earnings per share, net of one-time special items, increased 22% year-over-year to $0.11, easily exceeding consensus expectations. Although Alcoa isn’t nearly as important to the US economy as it once was, the firm still provides a general overview of several important sectors. Aluminum prices were flat during the quarter, but the firm anticipates global growth of 7% with supply and demand remaining balanced. Image Source: Alcoa Analyst Presentation Q1 2013 Alcoa sees a positive outlook for several sectors … Read more

Euphoria Running Rampant: Investigating Some of the Hottest Names Around

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Image Source: Tesla Roadster As we march forward in what Morgan Stanley has dubbed a bull market of “epic proportions,” euphoria appears to be at levels perhaps not seen since the dot-com bust of the early 2000s. Let’s take a look at some of the “hottest” names on the market. By Kris Rosemann and Brian Nelson, CFA Earlier this month, Ireland (IRL, EIRL) borrowed five-year paper at a -0.008% (negative 0.008%), meaning that the country is being paid to borrow. If you recall, we penned a piece in April 2016, that commented on an obscure article in the Journal where a Danish couple was being paid interest on their mortgage (that’s right – they are being paid interest, not paying … Read more

The Price-to-Earnings Ratio Demystified

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By Brian Nelson, CFA The Price-to-Earnings Ratio Demystified The price-to-earnings (P/E) ratio seems so easy, right? The trailing P/E is just the price per share of the stock divided by the annual net diluted earnings per share the firm generated in its last fiscal (calendar) year. The forward P/E is the price per share of the stock divided by next fiscal (calendar) year’s annual net diluted earnings per share of the firm (or the forward 12-month period). The P/E ratio is probably the most well-known measure to help investors compare how cheap or expensive a firm’s shares are, as stock prices, for lack of a better term, are arbitrary. For example, stocks such as Warren Buffett’s Berkshire Hathaway (BRK.A), which … Read more

How to Think About Corporate Tax Reform

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The Electric Vehicle (EV) Market Is Hot and Getting Hotter

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Image Shown: A look at Tesla Inc’s new Gigafactory factory (Model Y body shop) in Shanghai, China. Image Source: Tesla Inc – Third Quarter of 2020 IR Earnings Presentation By Callum Turcan The electric vehicle (‘EV’) market is hot and getting hotter. Aided by a combination of supportive government policies such as subsides for EVs (purchase tax credits, manufacturing tax credits), plans to ban the sale of automobiles powered by internal combustion engines (‘ICE’) in the coming years, and shifting consumer preferences (households preferring to appear “green”), the long-term outlook for EV sales is quite bright. Tesla Inc (TSLA) is the posterchild of the EV boom given its first-mover advantage, though competitive headwinds are rising. Legacy auto manufacturers are looking … Read more