Ford And NIO: Pair Trade Still Valid After 70% Price Divergence

Apr. 27, 2023 1:48 PM ETFord Motor Company (F) Stock, NIO StockF, NIO21 Comments

Summary

  • This article is a revisit of a pair trade idea that I published about a year ago in the EV space: sell NIO Inc. and buy Ford Motor Company.
  • I will explain why the pair trade idea is still valid today despite the large price divergence in their stock prices over the past year (~70%).
  • The cash flow problem at NIO has worsened and I expect it to remain strained by several headwinds.
  • Ford, on the other hand, enjoys much more stable economic earnings and is immune (or less sensitive) to many of these headwinds.
  • Looking for a helping hand in the market? Members of Envision Early Retirement get exclusive ideas and guidance to navigate any climate. Learn More »

Dices cubes to trader.

Sergey_P

Thesis

About a year ago, Seeking Alpha organized a competition among its authors for the “best pair trade idea.” The competition involves an analysis of 2 stocks with key common denominators, and the entries were to recommend a Buy on one stock

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This article was written by

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Envision Research, aka Lucas Ma, has over 20+ years of investment experience and holds a Masters with in Quantitative Investment and a PhD in Mechanical Engineering with a focus on renewable energy, both from Stanford University. He also has 30+ years of hands-on experience in high-tech R&D and consulting, housing sector, credit sector, and actual portfolio management.

He leads the investing group Envision Early Retirement along with Sensor Unlimited where they offer proven solutions to generate both high income and high growth with isolated risks through dynamic asset allocation. Features include: two model portfolios - one for short-term survival/withdrawal and one for aggressive long-term growth, direct access via chat to discuss ideas, monthly updates on all holdings, tax discussions, and ticker critiques by request.

Analyst’s Disclosure:I/we have a beneficial long position in the shares of F either through stock ownership, options, or other derivatives. 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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