A Tesla investor on Twitter recently described Ford as a wealth destroyer, commenting that Ford’s five-year return is minus sixteen percent, while Tesla has increased 1300% over the same period. It seems the tables have turned in Ford’s favor in 2021, however. Ford stock has increased over 31% this year, while Tesla is essentially flat over the same period. I own Tesla stock. I do not own Ford. But do not assume this means Ford is not a good investment, maybe even a better investment than Tesla today.
Well before my interest in the future of transportation-as-a-service, I acquired and owned Ford stock from 2008 to 2017. I’ve always believed that leadership is critical to the success of a company. There is no such thing as an “autopilot” setting for corporate performance. The CEO tenure of Alan Mulally at Ford (2006 - 2014) turned Ford into one of the best performing automakers in the world. The total return during my Ford ownership was 141% including dividends. Effective leadership at Ford seemed to be lacking after Mulally’s retirement, however, driving me to sell all of my shares in the company. But Ford has a new chief today. CEO, Jim Farley, seems to understand how to drive today’s profits while making smart investments that will insure Ford’s future success in a rapidly changing automotive world.
Ford beat Q1 2021 earnings on both the top and bottom lines. Although the company will lose over 1 million units of production this year due to the ongoing chip shortage impacting most automakers, this is a challenge with no long-term impact on Ford’s future performance. In fact, with the stock down nearly 8% to $11.54 since the Q1 earnings announcement, this could be a nice buying opportunity. Compared to Tesla’s market capitalization of $672 billion, Ford’s market cap is only $45 billion. If Tesla’s value is reasonable (or under-valued as some suggest), then maybe Ford is under-valued as well based on its future prospects. Since taking the reins at Ford, Farley is very focused on today’s most profitable Ford products along with accelerating the company’s EV and autonomous vehicle plans so important to its future.
Ford has a strategic partnership with VW for commercial vehicles, recently expanded to include electric vehicles and autonomous vehicle technology. Think of this as future technology cost sharing similar to the GM - Honda partnership.
The company recently announced a plan to build a battery research lab, seemingly reversing the bad decision of previous leadership to solely rely on battery suppliers for new battery technology.
With the bulk of Ford’s profits coming from trucks and SUVs, Q1 saw truck sales climb by 5.1%, and SUV sales grow by 14.3%. Not only do Ford’s trucks and SUVs pay today’s bills, but these products fund the company’s future technology investments.
Is Ford a better investment today than Tesla? If you believe the future EV landscape will contain several winners as I do, then there is room beyond Tesla for legacy automakers like Ford to succeed as well. Ford’s $45 billion valuation does not seem to include any recognition of an EV and autonomous vehicle future for the company. Is Ford really 15 times less valuable than Tesla? With Jim Farley at the helm my belief in Ford’s future is growing substantially. Although I own General Motors stock as the only legacy automaker in my taGMan portfolio, I now believe Ford has great chance to be a winner in a future world of EVs.
My taGMan Portfolio Stock Allocation
The taGMan portfolio consists of 7 companies I believe will thrive in due to a future world of EVs, autonomous vehicles, and mobility solutions.
Tesla: 25%
Apple: 15%
Google: 12%
Microsoft: 13%
Amazon: 12%
Nvidia: 10%
General Motors: 13%
What I’m Reading, Watching, and Hearing
Disclaimer
TaaSMaster, LLC is not a registered investment advisor or broker/dealer. All investment opinions expressed by TaaSMaster, LLC are from personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors may occur.