Just over 5 months ago, I wrote an article detailing what was holding Ford's (NYSE:F) stock back. I argued for BMW (OTCPK:BAMXF) (OTCPK:BMWYY) as an inherently better company with higher margins and a more durable edge/moat that would result in a better return on your investment. As long as BMW was underpriced or priced similarly to Ford, Ford would have difficulty reaching its fair value. In my comparison, I also gestured at how from a metrics-based comparison, even Honda (NYSE:HMC) should rise before Ford. With the benefit of our dear friend hindsight, let's see how this analysis has fared.
Clearly, from this simple chart, BMW has outperformed Ford by about 8% and the SPX by about 5% since late August. Of course, the Euro has weakened around 4-5% since then. To be generous, even when we add in the Ford dividends paid out since, BMW still does better. In broad strokes, I've already analyzed where BMW outperforms Ford as a company, and it appears that cross-sectional look has proven accurate.
However, we haven't been as accurate with Honda. Honda has been flat since crushing earnings back in August. If we look at the Japanese-listed Honda, we see that it's up almost 14% over this time period. Of course, this is mostly due to fluctuations in the USD/JPY.
This aside, the fundamental reasons Honda hasn't grown lies in some issues I failed to address in my August analysis. First off, the Takata airbag incident still bogs it down, as Honda was the largest customer of these faulty death bags. Secondly, decreasing sales (but steady market share) in its home market of Japan can't compensate for its sexy new lineup that's performing well in the US and Canada.
With this in mind, where do we go from here? Sales of cars in the US have started to peak. However, with low gas prices probable for several years (Trump's protectionist policies benefit shale by taxing imported oil, leading to more shale companies pumping) and light truck sales actually moving upwards, Ford stands in a great position to profit. While GM (NYSE:GM) has been the auto growth story these past few months, look for Ford to potentially wrestle that position back in the next year.
With all this said, I would hold onto Ford as of right now. Ford, as many Seeking Alpha authors will enthusiastically agree, is a fundamentally sound company that's undervalued. Gas prices, shifts in consumer preferences, and the recent inflow of money into its major competitor leaves its stock in a good position to grow over the next 9 to 12 months.
At the same time, if you have a position in BMW like I do, I would continue holding onto it. BMW is positioning itself well for self-driving, coming second to only Tesla (NASDAQ:TSLA) in a head-to-head self-driving comparison. With its strong financials, healthy dividend, and the ever-growing crowd of yuppies yearning for that Teutonic steel, BMW is here to stay, even with the strengthening USD.
PS: I link the OTC market BMW ticker. I would, however, buy the one traded on the Xetra index, as volume is much higher there.
Disclosure: I am/we are long BMW.
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.
Additional disclosure: I am long BMW via short put options.
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