Ford Stock Analysis: Is Ford Stock a Buy or Sell?

Ford Stock Analysis: Is Ford Stock a Buy or Sell?

Many investors have struggled with the uncertainity of Ford Stock (F), America's largest automaker, and the stock has taken a beating recently.

It's down 33% over the last year but things are looking much better in the future for Ford Shareholders. One of the most important traits of a good business is a strong brand and Ford has one of the most iconic brands in the world.

Quick Overview of Ford Company

Henry Ford invented the first automobile and Ford is the #1 truck seller in a highly competitive US auto market. Another positive sign for Ford stock is that it's still highly profitable.

In Q3 2018, Ford posted a quarterly profit of $3.7 billion and the company remains a cash clow despite the recent ugly performance of Ford Shares. This means the stock is struggling but the company itself is still strong and stable.

As more consumers change their car buying preferences, Ford has made an effort to focus more on higher margins vehicles like Trucks and sedans and focus less on the smaller sedan market.

This seams like a smart move because consumers are prefering more spacious and comfortable trucks and SUVs than smaller passenger cars.

Trucks and SUVs are higher margin products plus it's hard for Ford to compete with companies like Toyota who are the leaders in smaller passenger cars.

Strong Brand with a High Dividend Yield

One of the nice things about Ford stock is the attractive dividend yield. Currently at 7%, dividend income investors receive a nice quarterly dividend check as they patiently wait for the market to realize the huge mispricing in Ford's stock.

These dividends can be reinvested to purchase more shares at its current lower price or provide steady income for investors.

Moving Towards All-Electric Vehicles

When people doubt the future of Ford, we must remember that they are always innovating and growing with the changing global demands of the auto industry. Ford plans to launch its all-electric vehicles in 2021 and this change will open up a huge revenue stream as consumers become more environmentally conscious.

I'm always on the lookout for beaten down stocks that are currently making substantial changes to their brand, product lines and R & D.

Jim Hackett Leads a New Future for Ford

Jim Hackett, the newly appointed CEO in 2017, has a reputation for transforming stuggish companies into hugely profitable mega-companies.

While many naysayers believe his strategy for letting go of smaller cars to focus on bigger models seems risky, he is simply focusing on what Ford does best: make big trucks & SUVs that make drivers feel powerful and safe.

Dropping lower margin products to focus on more profitable items is a common sense approach to increase revenue, boost the bottom line and return more value to shareholders.

Conclusion: Ford Looks Extremely Valuable in the Long Run

My first ever car I bought was a Ford Escort and their products have always left a strong impression in my mind. American cars are some of the best vehicles on the market and we are approaching a transition in the auto market where ride sharing companies create a stronger demand for consumers to purchase automobiles.

The middle class is growing in places like Africa, India and China and these new consumers will think “Buy Ford” when purchasing bigger, flashier trucks & SUVs.

Ford is a good buy for traders looking to profit from the recent surge in price while income investors can pocket a dividend check for their retirement (IRA) accounts.

Long Term Price Target: $20 per share.

Disclosure: I own shares of Ford Company.