Ford Motor (F)

You don't need to choose between Tesla and Ford. This isn't an either-or question. He likes Ford for its dividend yield and its agreement to use Tesla's charging network for Ford's EVs. This let shares rise 3 points since late May. Their traditional gas-powered cars spew cash and fuel their EVs.

Been under pressure in recent months, but has found support at current levels. Not bad. However, a recession will decrease car sales. If you buy now, set a 5-year target, and buying now is reasonable.

If you really have your heart set on it, wait, given where we are in the economic cycle and the potential of a recession. Recession could be shallow, could be deep. Higher interest rates dramatically impact the purchase of vehicles. Has to reinvent itself. Any money it makes has to be reinvested in the business to prepare for selling EVs, so it won't have any free cashflow. He'd prefer something more durable and cashflow-focused over the long term.

Owns neither. Cheap for a reason, until they're no longer in combustion engines and just compete in EVs with TSLA, which will be hard. 

Big OEM companies are in a very difficult situation. Legacy businesses trying to move to EV. But the combustion business is supporting the EV business. Being tied into dealerships make things difficult too. With TSLA, you order online and then go pick it up, like buying an iPhone.

Combustion side involves so many more parts than EV, so layoffs on the table. More things can go wrong with combustion engines than EV. 

It trades at a low PE, but carries high risk. We're headed for a cyclical downturn in car sales. Car loan rates have jumped from 5.6% to 9% in the past year. Also, few analysts are confident that it can transition easily from gas cars to electric or how to balance the two types. Pure-play Tesla has an edge. Also, the company is heavily unionized. Last year, it suffered supply chain shortages and it had troubling warranty issues. It's a value trap. It's a value trap. All that said, he expects this to be a breakout quarter for Ford when they beat their numbers in their gas-car business; this is tremendous earnings leverage. Also, Tesla has scaled back its pick-up truck business a lot while Ford has raised prices for its F-150 twice but still sells. And if the Fed manages a soft landing, this stock will take off.

Owns shares in Mercedes and thinks is a better option.
Decent dividend yield at ~4%.
Price currently below 200 moving average.
Current share price presenting good buying opportunity for value investors. 

It's been a dog the past year. he took profits. It's been one thing after another: operational issues, semis shortage, cost pressure, supply chain issues, pension problems, higher rates and a slowing economy. He likes the CEO, but his patience is growing thin and he may sell shares. Fresh results of their new divisions: Ford Pro and Ford Blue did great in 2022, but Ford Model E had huge losses. 2023 forecasts are the same: Pro & Blue will do well ($7b + $6 b adjusted EBIT), but Model E will lose $3 billion in adjusted EBIT. It takes time and big investments before EVs become profitable. They are getting their house in order. Still, he's encourage by their EVs and will hold on for now, BUT Ford needs to unveil a profitable quarter eventually.

He models $15.86, some upside, and trading at book value (his metrics). It's a cyclical and we're heading into a recession. He wants to see the dividend cut. The macro needs to get better, but would buy after a recession. Wrong time now.

A $12 stock that pays a 5% yield. Don't own auto stocks in a recession, but they will own the e-pick-up market. So, this won't become a Musk vs. Ford scenario, but a Musk AND Ford market.

He isn't playing in this space now. Car sales have been a lot more resilient than many expected. Ford just said it will increase production in 2023, adding lines. But the US Fed said today there will likely be more rate hikes which will pressure car sales. Be careful. Either trim or watch.

He's holding the CEO's feet to the fire, because the CEO guaranteed to him that he will right his company's ship this quarter.

Upheaval in the auto industry. Combustion transition to EV is massively expensive. Probably won't have free cashflow for the next decade. Massive spend to stay relevant is a huge negative. Look for a more stable earnings profile.

$13 today but also in 1997, so shares have gone up and down. That's 25 years of nowhere at at time when carmakers see the best decade in a while. Maybe they got complacent, being an old company. That said, they can capture EV market share from Tesla, so this is probably Ford's last weak quarter in a while. 

It's too early to invest in Ford, too early in this turnaround.

It will take CEO Farley a while to turn this around. Cost issues are nothing new. They cut jobs in Europe and will streamline production there to operate more like the U.S. or South American operations. Ford has been trading at a discount to GM because of this. Ford, though, has outperformed GM a lot because their EV story is very exciting.