Value investing is a tough task, but generally carries less risk than other stock investing because you're investing in strong, established companies that for some reason might be struggling at the moment. The most important quality an investor can have when it comes to buying a stock at a discount is patience. If the stock is surging down, don't buy. Let the stock settle out and perhaps stabilize a bit so you can see where support and resistance patterns fall into place. One of my favorite value buys right now is Ford Motor Company (F).
Ford's stock has been battered down again. Though this time around, the problem wasn't related to the American economy. Car sales in the United States have been terrific, and this past August Ford's August sales numbers were up 13.1% from the previous year and have been the strongest in 5 years. U.S. sales have almost topped pre-recession, all time highs. This time around, the main culprit of Ford's struggles have been Europe.
Ford has lost a gross total of $404 million in Europe this past quarter. While the results in Europe aren't what Ford has hoped for, the company isn't waiting around to waste more money. Alan Mulally and the management team are cutting back on production in Europe, at least until the economy shows some signs of life. Ford's stock has been neglected for too long, but now I think it's time to buy.
Ford's stock only sells for about seven times projected earnings, which is nearly half of what the market average is. Ford is expected to double its dividend by 2015, which is already yielding about 2% annually at current levels. The company was also recently restored to investment grade this year, after they have been slashing remaining debt rather efficiently. Increasing Lincoln production and sales in China is also on the agenda for Ford, as they withdraw some of their efforts from Europe for the time being.
With all these positives, Ford could have some problems as well. Some may question whether the American economy can hold up enough to support Ford's stock price at current levels. Also will the European debt crisis drag out longer than expected? Regardless though, Ford is a well experienced company that has faced similar situations before. The cars they have been creating lately have been eye-catching in my opinion too, in comparison to former designs.
Ford's recovery might now be as fast as one may want. However, I believe current levels present a great long-term opportunity that investors should try to capitalize on.