There are approximately three weeks remaining in January and already the S&P 500 has posted a gain of nearly 2% year-to-date. The auto and truck manufacturers has been one of the better performing industries during this time with a near 6% gain, after encouraging data surrounding various companies in the industry. I anticipate additional gains within the industry throughout January, with Ford Motor Company (F) being the catalyst for the industry's gains.
As we all know, auto stocks trade together. It doesn't matter what occurs with individual companies most of the time these stocks trend together. During the last six months the industry lost more than 8% of its value and Ford Motor Company lost more than 20% and General Motors (GM) lost over 30% during the same period. This loss came despite significant fundamental progress as investors worried that the industry's presence in Europe could substantially affect sales. But now that data are being released that show how strong the industry performed in 2011 along with individual companies these stocks are posting large gains in 2012. With that being said let's look at a few headlines from GM and F since then year began.
Ford Motor Company
- January 4 - Company will invest $142 million in its Chennai, India, plant to manufacture a global compact SUV. Asia accounted for 100,000 cars sold in 2011 but Ford anticipates Asia contributing one-third of its global sales by 2020.
- January 4 - Ford brand sales up 17% in 2011.
- January 4 - Ford December sales up 10%, beating estimates of 7.7%.
- January 9 - Ford achieved record auto sales in China as Japanese auto makers declined. Ford sold 519,000 vehicles in China, a gain of 7% year-over-year.
- January 4 - GM announces full-year sales gains of 14% and December auto sales of 5% year-over-year.
- January 5 - GM announces safety enhancements for its Volt which previously had battery related issues.
- January 9 - GM achieved record sales in China and strengthened its market share with 2.55 million units sold.
It has been a busy New Year for both companies, which are coming off an incredible year in 2011, which was previously ignored. In 2011, the fundamental progress was replaced with fear in Europe and investor assumption that auto sales in the struggling regions would drive auto sales lower. However, auto sales are at their best rate since cash-for-clunkers and are expected to produce another great year in 2012 as a result of global growth. These companies are showing the ability to grow and succeed despite the economic hardships within the large market of Europe.
I have written on several occasions that both Ford and GM will double in 2012 and I believe this is a near certainty because of both companies' fundamental improvements. And I expect January to remain strong and for both GM and F to continue trading much higher. Most likely, there will be additional results from 2011 that reflect growth along with guidance for 2012 that will also predict growth throughout the globe. But most importantly I believe Ford's dividend will be the driving force behind the gains which will allow the industry to trade off fundamental progress in January.
Ford's yield is a return that investors have been anticipating for the last six months and much of its loss has been a result of the company waiting before implementing the dividend. The company's record date is January 31, which means that investors holding shares on the 31st of January will receive $0.05 on every share that is owned. And although it's not a large yield it's enough to entice investors to purchase shares of this company, which is releasing market moving news on a daily basis.
The impact of Ford's yield is significant to the industry and will help push similar stocks higher in January. As I said, this industry tends to trade together, on a day-to-day basis, and I anticipate the combination of encouraging news and Ford's record date to push the industry higher and allow other stocks such as General Motors to trade higher. There is still three weeks in January and I expect that by the time February begins we will be looking at monthly gains of at least 25% for both Ford and GM whose fundamental improvements are simply too strong to ignore.
Disclosure: I am long F.