Ford (F) is leading the U.S. automaker comeback. Recently, I penned an article stating my case for being bullish on Ford - claiming that the trend of possibly having the number one sedan in the U.S. in 2014 could telegraph new highs for the stock. I predicted, in my last article, that the Fusion was going to be the key component for the automaker to compete for top selling sedan in the U.S. for 2014.
I was confidently reaffirming my bullish sentiment on Ford during the beginning of the week this week - based on how well the Fusion has been performing in sales. Included in my bullish argument were the risks inherent that also could have a negative effect on Ford going forward. One of these major risks was the overseas auto market.
On Friday, my Ford argument got another nice shot in the arm, as it was reported that U.K. commercial auto registrations continued on the rise:
Commercial vehicle registrations rose 12.4% in September, with greater confidence and impending Euro 6 legislation producing a strong recovery in truck volumes," said Mike Hawes, SMMT Chief Executive. "Encouragingly, van registration levels have stabilised, up around 10% in the month and year-to-date, after a variable year that reacted to model changes and changeable market conditions. Year-to-date truck demand is back to 2012 levels after a slow start to the year and we expect the last quarter to be very strong for the sector.
With Ford increasing its footprint overseas, and continuing to be a player in the truck market in the U.K., it's looking like the worst of the auto crisis in Europe is already over with. This is a key signal to help keep my caveats at bay with Ford and its growth worldwide.
If the original bottoming of the auto market overseas was a trend that was centralized to a large market of Ford's, there could be room for major concern - but this a macro trend overseas, and one that appears to have hit a bottom. Now, it's looking like the trend could very well be at the start of an upswing.
The New York Times recently reported that auto sales in Europe are likely to find a revival by 2015:
Harald Hendrikse, an analyst at Nomura International in London, said that taken together, the two months appeared to have been roughly flat from a year earlier.
"The good news is that there is probably no more deterioration," he said. "Clearly, from a low, low base, we are stabilizing. The bad news is that it's not getting any better, either."
Again, my main caveats with Ford as an investment revolved around the company's performance overseas, not in the U.S., as I noted in my article, "Should You Be Worried About Ford's European Production Halt?":
Risk here lies in the fact that the entire European auto market (sans Britain) is largely tied to the European economy, which is like trying to balance an elephant on the head of a pin. If the European economy continues to deteriorate, it's likely the auto industry will as well - leading subsequent shutdowns to not be as "temporary".
However, in the midst of data showing the auto market overseas has likely bottomed out, and the hope of the European economy not being able to get much worse, I'm reaffirming my bullish sentiment on Ford - a company that simply seems to be doing the "right thing," as of late.
Investing Insight, which penned an article on Thursday, seems to think the same thing:
Ford is currently enjoying the perks of the U.S. auto sector revival. It is well positioned in the Chinese market to cater to the needs of the world's fastest growing auto industry. In addition, the slight recovery in the European auto segment is believed to make the prospects even better for this car manufacturer. The company is trading at a lower price to earnings multiple than its peers and giving out a healthy 2.3% dividend yield. Ford presents an attractive opportunity for investors. Therefore, for the investors who want to enter into the auto sector play it is recommended that they add Ford to their portfolio.
With this major risk looking like it's not going to stand in Ford's way overseas anytime soon, I'd reaffirm that it's a great time to be long on the company.
Sure, the risk still exists, so it'll be important to continue tracking auto sales metrics not only from Britain (where the upswing has started), but in the rest of Europe as well. Again, anytime you're dealing with Europe or the European economy things can change on a whim - so there still is risk.
However, with Ford (in my opinion) about to bump its dividend and continue to grow globally, as well as domestically, I see Ford stock continuing to be a vehicle for gains moving into 2014.