- The entire market has pulled back over 10% in a matter of just two weeks.
- With that, there's been some gifts in the world of value; we think Ford is one of these.
- As a reminder, the stock market isn't always indicative of a country's economy.
By Parke Shall
If you're a long term oriented investor and you're looking for dividends, value, and brands that are as American as apple pie, you have to consider Ford (NYSE:F) here on the market's recent sell-off. Many equities have been hit hard over the last week as the Dow has moved from 18,000 down to 16,000 in short order, but as we expected.
^DJI data by YCharts
Whether this is a "cooling off" period or whether it's the start of another pullback further lower, it doesn't matter. There's a couple equities that we think we should be buying on the way down, no matter how much lower they move from current prices, and Ford is one of them.
Just as Josh Arnold did earlier today, we need a reminder that a country's stock market crash is not indicative of its economy crashing.
WE think Ford is a gift here because of its valuation, which at $12.90 gives it a price/sales of 0.37x and a forward P/E of just 6.72, which is even low for an automaker. The company's consistent yield, which is not at risk, remains a great reason to add at lower prices or continue to DRIP shares while the price of the equity sinks. This is our plan.
F Dividend Yield (TTM) data by YCharts
In other news, speculation is that Ford may be bringing some manufacturing back to the U.S. USA Today stated,
Ford is not commenting on a media report that the automaker is considering building the Ranger compact pickup at the Michigan Assembly Plant later this decade.The automaker has been criticized for its decision to move production of the Focus compact car, Focus electric car and C-Max hybrid and C-Max Energi plug-in hybrid out of Michigan Assembly in 2018. Many have speculated the work will move to Mexico where labor rates are lower.
(click to enlarge)
We like the idea of moving manufacturing back into the U.S., especially with the criticism Ford has felt from GOP presidential candidates for moving some operations to Mexico.
As a reminder, on the 13th of August we wrote why we thought Ford was going to fine in both the US and in China.
We have a long-term long position in Ford, and as we've said, "we're not betting on the company having a great year this year, we're betting on the company's meticulous selection of capital allocation into select investments to fuel its growth globally over the long term."
We continue to believe that Ford is a win/win because:
1. We have a very long-term time frame in holding the company, and
2. in the meantime, we're collecting the company's yield of over 4%.
If you remember, the company came out at the beginning of the month and tried to calm fears that China was slowing. The company and its executives seem to be prepared and have a firm grasp ton what the macroeconomic impact is going to be for their business moving forward.
We think the prudent thinking here is to remember that China's stock market isn't driving its economy, that Ford has a strong backbone in domestic sales, and that the company said as recent as this month that they're aware of what's going on in China.
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