TSLA

$45 Oil Prices!?!? There Is Never a Sense of Urgency When One Is Prepared

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Image Source: Macrotrends The bull market in energy (XLE) has lasted for the better part of a decade. Ever since the turn of the new century, energy perma-bulls have made the case that “black gold” (USO) should continue its ever-upward price advance thanks to ongoing demand from emerging and developing economies coupled with reduced inventories and areas of supply. We’re seeing this thesis challenged right at this moment. In deciding not to cut crude oil output in the face of oversupply and falling prices, the Organization of the Petroleum Exporting Countries (OPEC), for the lack of a better phrase, is now essentially engaged in a price war with producers in the US that are using breakthrough technology to produce oil … Read more

Third Quarter Earnings Season Pushes Forward

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The equity markets continue to propel higher despite what we would describe to be a mixed third-quarter earnings season. Let’s walk through a number of earnings reports from popular companies reporting so far this week. Some of them we include in the newsletter portfolios. Others we don’t. But all are worth keeping tabs on. Annaly (NLY) Annaly is a mortgage REIT (mREIT) with principal business objective to generate net income for distribution to shareholders. Being critical of the mREIT business is certainly unpopular, and we understand that many retirees generate vital income streams from such investments. Bulls and bears, however, both benefit from our independent voice, and we call out risks as we see them. Annaly and American Capital Agency … Read more

Ford Surprises to the Upside; GM Distracted By Recalls

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Sometimes it’s easy to fall in love with a company and its products. This, unfortunately, can become a behavioral and psychological barrier to financial outperformance. Whether you are a Ford or Chevy guy or gal determines little about how successful you will be as an investor in auto stocks. The most important determinant to financial outperformance in the auto space is not based on which type of car or truck you drive (or like), but instead, it is based on understanding and capitalizing on the factors that drive stock prices. To this point, stock prices are driven, of course, by the buying and selling of shares, and the buying and selling of shares is primarily influenced by a company’s intrinsic … Read more

Valuentum Economic Castleâ„¢ Rating Update

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Read: Keeping the Horse Before the Cart: Valuentum’s Economic Castle™ Rating The Economic Castle Focuses on the Magnitude of Economic Value Creation The Valuentum Economic Castle™ rating is an enhancement of the competitive advantage framework (commonly known as economic moat analysis) that has become widespread and ubiquitous within the investing world. Whereas an economic moat framework evaluates a firm on the basis of the sustainability and durability of its competitive advantages, Valuentum’s Economic Castle™ rating evaluates a firm on the basis of the firm’s future economic profit spread (return on invested capital less its weighted average cost of capital). The companies with the strongest Valuentum Economic Castle™ ratings are poised to generate the most economic value for shareholders in the … Read more

Ford’s Opportunity in China

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Asia Pacific Africa “Ford’s strategy in Asia Pacific Africa is to grow aggressively with an expanding portfolio of global One Ford products with manufacturing hubs in China, India and ASEAN… …In the fourth quarter, wholesale volume was up 29 percent from a year ago, and net revenue, which excludes the company’s China joint ventures, grew 16 percent. Ford’s wholesale volume in China was up 45 percent in the fourth quarter and about 50 percent for the full year. The higher volume in the region mainly reflects improved market share. Higher industry volume, increasing from a SAAR of 33.1 million units to 38.1 million units and favorable changes in dealer stocks also contributed. Higher revenue primarily reflects favorable volume and mix. … Read more

Best Ideas Portfolio Holding Ford Puts Up Fantastic March Sales Numbers; Best in 8 Years!

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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 … Read more

Ford’s Pension Under-fundedness Under Control; Magnitude of Stock Price Multiple Discount Unwarranted Even After Considering Operational (cyclicality) and Financial (Ford Motor Credit) Risks

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Executive Summary: Ford has been a solid performer in the portfolio of the Best Ideas Newsletter. Though 2014 may not be its best year, we think the best times at the company are still ahead of it. A sub-10 trailing earnings multiple is too harsh, even after considering operational (cyclicality) and financial (Ford Motor Credit) risks. We couldn’t be happier with Ford’s (F) performance during 2013, results released January 28. Full-year 2013 pre-tax profit of $8.6 billion advanced more than $600 million from the mark in the same period a year ago and represented one of Ford’s best years ever. The company’s full-year earnings per share of $1.62, which jumped $0.21 from the same period last year, implies a trailing … Read more

Throw December Auto Sales Numbers Away; December Ice Storms and a Late Thanksgiving Holiday to Blame

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The excuses for the subpar selling performance at automakers in December (up just 0.3%) were many: the frigid ice and snow storms that scared customers away; a late Thanksgiving holiday that stole sales from the month; and a shortened holiday shopping season that left consumers scrambling to buy holiday gifts for family and friends, as opposed to spending time car shopping. Though the impact of each contributing factor is difficult to measure, we think the combination of these items was the main culprit for disappointing December auto sales, not that the consumer has decided to forgo car purchases and that the upswing in auto sales has come to an abrupt halt. Some caution is starting to creep into the market—see … Read more

Ford Shines Bright in November; Potential Channel Stuffing By GM; Toyota Suggests Industry Sales at Fastest Pace Since 2007; Nissan Sets November Record; Honda’s Second-Best November Performance

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On Tuesday, Best Ideas portfolio holding Ford (F) put up its best November US auto sales performance in almost a decade. US sales at the automaker advanced 7% in the month, exceeding the mid-5% consensus forecast, while retail sales were up 9% for the period. The F-Series topped 60,000 sales for the seventh consecutive month (it sold 65,501 F-Series trucks in the month, up 16% on a year-over-year basis), and passenger car strength was led by Fusion and Fiesta sales, which jumped 51% and 26%, respectively. Total passenger car sales achieved the best sales result since 2002. November was a month to remember for Ford!  The automaker announced that it would build 770,000 vehicles in the first quarter of 2014 … Read more

Tesla Is Converging to Our Estimate of Its Intrinsic Value

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On Wednesday, Tesla (TSLA) reported in-line third-quarter results that showed record levels of Model S production, deliveries, and vehicle gross margin in the calendar quarter. The freshly-minted electric automaker generated positive free cash flow in the period ($26 million) and put up its third consecutive quarter of non-GAAP net income. The firm is now producing 550 cars per week, and Tesla plans to continue to increase production over the next several quarters to keep up with demand expansion. Tesla’s non-GAAP automotive gross margin (excluding zero emission vehicle credits) rose to 21% from 14% last quarter, as the firm was able to extract cost reductions and improve average pricing thanks to a greater mix of highly-optioned European deliveries and ones with … Read more