Ford Motor (F)

Doesn't own car companies as a rule -- highly cyclical, capital intensive, highly competitive, massacred with shift in the EV market. Bifurcated economy adds to cyclicality.

Industrials benefit from lower interest rates.

Three businesses here: traditional gas and hybrid cars, EVs, and Ford Pro (commercial van and fleet). They were investing heavily EVs, but haven't seen a profit yet, so that's an overhang. Topline growth is flat. Tariff impact remains in flux. Are in a tough market.

Tariff uncertainty, stiff competition. On track to deliver $1B in cost reductions this year. Very good balance sheet. Very inexpensive at 7x PE. Hybrid and EV strategies look good long term. Sees nice growth for 2026-28. Dividend wasn't cut, unlike GM.

Not a fan of auto stocks, as they're cyclical. There's a time to buy, and that time is now.

Pushing back EV mandates in the US helps them. Moving to more full-size, profitable vehicles also helps. Over time, losing structural market share. More of a trading stock.

Broadly, stay away from auto stocks. Not a long-term hold with a bright future. The CEOs of combustion engine companies have to consider not only shareholders, but also employment, tax revenues, and so on.

Shares have been flat the last four year vs. the S&P up 65% and GM 68%. I positioned on tariffs better than their peers, because their production is in the US, but the problem is their production is expensive. That's why there was gloabalization--to reduce input costs.

It reports Monday. He's a little concerned. They've worked to mitigate the tariffs. He hopes they can break their streak of so-so quarters.

No, caller's not crazy to want to buy. There will be a chance to reimagine what the car industry will be. Current US administration will be very partial to US manufacturing. Cross-border tariffs on auto parts won't affect it as much as people feared. Traditional US car companies may be better value than some of the more hyped players.

They have warranty problems that make their earnings a black hole. He prefers GM, despite their weak dividend.

Owns GM instead. Ford lacks the cash of GM, among other metrics, and lag GM in this sector.

Ford and GM have some of the lowest PEs around (7.3x and 4.3x) vs. the 22x S&P average. Ford pays a 6.2% dividend yield, while GM has a huge buyback plan. Incredibly cheap--until the tariffs started. Remember: the car-makers were a huge reason why Trump used tariffs in his first term which lead to the USMCA trade deal. But now Trump wants to take away the qualities that made US cars competitive and affordable. Today, the car-makers got a one-month reprieve from Trump's tariffs and shares jumped. But if the car-makers wind up paying these tariffs, are we okay with the U.S. replacing cheap Mexican labour with expensive U.S. union labour? That's why these stocks are so cheap--their earnings are in grave danger. Value traps. A 25% tariff on Mexican imports is a subsidy for foreign car companies like Kia.

F has seen negative momentum over the past few years, falling from a high of $25 in early 2022 to $9 today. It pays a good yield of 8.4%, but this is mostly high due to its falling stock price. Sales are expected to be mostly flat over the next few years, and earnings are expected to fall in the near term, with some growth thereafter. The auto industry was at one time a rising and popular theme, but we have since likely reached peak auto, and the forward growth is not as attractive as it once was. It is cheap (6X forward earnings), but so far it has proven to be a value trap. We would look for opportunities elsewhere in the industrials segment.
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It reports Wednesday. It has disappointed due to warranty costs. With long-term interest costs high and likely rising, their sales could be stalling. The stock has been awful.

Problem is that Ford has big warranty issues--it costs so much to fix a car. Is -9% this year so far. The auto stocks need a rate cut.