Last week, I published a bullish outlook on Ford (NYSE:F), in an article titled "A Little Bit Of Ford Could Go A Long Way". While Ford's fundamentals, especially its valuation, are the basis of the rating and price target in that article, the company possesses a number of qualitative attributes that reinforce a bullish outlook in my mind.
As a long-term investor, I try to identify long-term trends and opportunities, not flavors-of-the-week. The Ford F-150 truck has been, not just the best-selling truck, but the best-selling vehicle in America for 3 decades and counting. The company's most recent press release, dated April 1, listed an especially strong 70,940 F-150 trucks sold in March. You can't ignore a track record, and continued sales numbers, like these. I believe Ford's dominance of the full-size truck market is a trend that will continue into the foreseeable future. I'm willing to listen to contrary arguments, but I couldn't identify a catalyst that might cause this trend to change.
This leads us to the question of whether or not trucks, in general, are in any danger of falling out of favor. As I see it, the simple answer is, "No". Although new technologies are beginning to cause dramatic shifts in every facet of the economy, I cannot imagine a scenario in which the pickup truck falls by the wayside in, let's say, the next 20 to 30 years. The human activities that make trucks so useful, namely business and recreation, are in no danger of going out of style. What else could the American masses realistically use to move sheets of plywood or to pull fishing boats? I don't know.
The point is a simple one: America loves Ford trucks. Americans have been buying them in droves for decades and they are still buying new ones every day.
Ford makes other vehicles beside the F-150, of course, and the current product line as whole is quite promising. This is largely due to Ford's ability to successfully innovate in recent years. The company has once again become an industry leader in this area, with the successful introduction of several new eco-friendly models, equipped with newly designed, high mileage engines, as well as other new technologies. These new features have been applied effectively to the F-150 as well as the rest of Ford's product line.
Remember Ford's old marketing slogan, "Have you driven a Ford lately?" They may need to dust that one off. With all of this innovation Ford has dramatically improved the quality of it vehicles in recent years.
I owned a Ford Ranger once, and have driven several other Fords over the years, but those were mostly 90s models. On a recent trip to California, I purposely rented a brand-new Ford Fusion to get a first-hand feel for the current Ford product. I was actually quite surprised by the car. It was sporty but still good on gas, nicely fit and finished, comfortable, easy to drive, etc. It was, by far, a better all-around vehicle than any Ford car I had driven in the past, and it was rental.
Apparently, I'm not the only one who likes the new Ford Fusion. March was a record sales month for the Fusion with 32,963 cars sold, a 9% beat of the previous monthly sales record, set in 2013. People are buying more of Ford's other vehicles as well, with total March sales rising 3% compared to last year.
Ford earns a significant portion of it revenues in foreign markets, so it's important to examine their global market position and strategy. Ford has been restructuring its overseas operations over several years, moving away from Europe and into higher-growth economies like Brazil and China. The company has recently managed to stem its annual European losses, which is a very positive sign. And although South America remains to be hit-and-miss at this point for Ford, the company has already begun to see very promising results from its investments in China. I believe this to be an appropriate and proactive strategy that reflects recent changes in, as well as future developments forecasted for, the global economy.
Back here at home, Ford has the unique reputation as the only American automaker to not take any bailout money from the government during the recent financial crisis. Wile this is purely anecdotal evidence, I have heard more than a few people, some friends, some random strangers, make mention of this as reason as to why they bought a Ford instead of a GM brand. A friend of mine, explaining why his father had purchased a Ford, said, "I had never seen him drive anything but a Cadillac, my whole life, until GM took that bailout money. Never again, he's a Ford man now." I don't how much, if any, this adds to the bottom line, but Americans still admire Ford's ability to weather that financial storm on its own. I believe Ford made a lasting positive impression upon a large swath of the American public that no advertising budget could ever duplicate.
Derivative Play: Alcoa Inc. (NYSE:AA)
On a CNBC interview, just after Alcoa released its earnings Tuesday, CEO Klaus Kleinfeld described Ford's transitioning of the F-150 to a mostly aluminum construction as nothing less than a monumental shift for the industry. He pointed out that Alcoa's first foray into aluminum vehicle construction, their work on the Audi A8, has sold roughly as many units in the last 20 years as Ford F-150's were sold in 2013 alone, north of 700,000 units. Later, on CNBC's Mad Money, he again mentioned the Ford F-150, but added that the he sees the automotive industry as a whole "moving toward aluminum". Alcoa may be a long-term beneficiary of the auto industry's answers to rising CAFE standards, as more and more parts are being made of lighter materials like aluminum in order to reduce vehicle weights.
Disclosure: I am long F. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.