Since last purchasing Ford (F) on the morning of February 26th that position is up 7% versus the S&P 500's (SPY) gain of 4.25%. Though the stock got a little bit more expensive since then, I still believe it is undervalued and made an additional purchase on the morning of March 5th; and that lot is even with the S&P 500. I will continue to add to my positions for as long as I see the stock to be inexpensive and for as long as the technicals don't show anything bearish. In this article, I'll evaluate what is currently going on with the stock since I last wrote about it and try to come up with my outlook on it.(click to enlarge)
In the article I wrote last week, the P/E ratio at the time was 8.88 and now has crept up to a value of 9.14, which is to be expected as the P part of the equation increased. In conjunction with the higher move in the P/E ratio we expect to see the PEG ratio move higher, increasing from 0.84 to 0.87. The PEG ratio is a ratio of price you're currently paying for the trailing twelve month earnings on the stock, then comparing it to the earnings growth of the company for a specified amount of time (I like looking at a 5-yr horizon). The 1-yr forward-looking P/E increased from 7.51 to 7.73 increasing for the same reason the trailing twelve month P/E ratio increased; an increase in price for the stock. The valuation portion of the discussion is still screaming a "buy" to me. All information is accurate as of 08 March 2013.
I didn't evaluate the financials the last time I looked at the stock, but it sports a very good 3.08% dividend yield and has a very good return on equity value beating its peers GM and Toyota (TM) by at least 100%. The return on equity is an important financial metric for purposes of comparing the profitability which is generated with the money shareholders have invested in the company to that of other companies in the same industry. Both these tidbits of information make me want to park my money more in F than I would in any of its competitors. All information is accurate as of 08 March 2013.
Div Yield (%)
Last week when I wrote about the stock, I mentioned that it sits squarely between its first resistance and first support levels and that I would expect it to test the resistance first because the relative strength index and moving average convergence divergence charts were showing bullish patterns with upward trends. This prognosis is coming to fruition; the first ceiling of resistance I called out was at $13.25 but still hasn't been tested yet. The stock has gone as high as 12.99. Currently F is trading above its 20-day simple moving average but below its 50-day SMA. I'd first look for the stock to test the 50-day SMA ($13.16) before it tests the first level of resistance standing at $13.25 still. I'm saying that it will test the resistances before the support levels because the MACD and the RSI are still showing bullish patterns which appear to be gaining strength.
- Ford will begin to import the EcoSport crossover from India into the European market because the crossover segment is one of the hotter automobile segments. This move is to try and salvage some of the overall European losses predicted by the company.
- Ford reported China demand for the first two months of 2013 is up 46% when compared to last year. I'd look for Ford to continue to grow as China grows because the middle class is beginning to live a more luxurious lifestyle.
As I mentioned last week, the stock would first test resistance and so far it has done so. I'd look for the stock to continue making gains in the current market pending any major macroeconomic issues that may arise. Personally, I may look to book profits on the first lot that I purchased but will continue to buy the stock regardless because I believe the valuations, financials, and technicals look to be in excellent shape for the time being. The stock should go ex-dividend within the next month-an-a-half or so, I would look to continue to build my holdings in the stock now to collect on the dividend in the next month.
Please remember that these are only my opinions and that you should do your own homework. Only you are responsible for your actions. Happy investing!
Disclosure: I am long F.