Ford (NYSE:F), an automotive and financial conglomerate, extends a diversified service package and has managed to gain an estimable name in the competition plagued automotive industry. Nested on a market cap of $46 billion, only belligerent competitors like Honda (NYSE:HMC), Tata Motors (NYSE:TTM) and Toyota (NYSE:TM) overshadow Ford's market cap figures - you cannot compare Ford's $46 billion to a triple digit figure like Toyota's $255 billion.
All the same, I would still opt for an investment in Ford. This is primarily because Ford shares will bring me higher earnings compared to Toyota's. The latter extends $0.7 earnings per share, which is a mere divide of Ford's $4.9. General Motors (NYSE:GM) is also another predominating competitor. Its earnings per share figures closely trail behind Ford, a disparity of $0.4. Ultimately, Ford still comes out as my winning horse. Its net income of $20 billion speaks tomes about its long term market dominance and success. General Motors and Toyota only extend $7.5 billion and $2.8 billion, respectively. In my own opinion, I have an unwavering conviction that Ford has a lustrous future ahead.
Ford reaches 13 year peak
Recent news reveals that the behemoth reached its peak, a high that has not been recorded over the last 13 years. Apart from gaining the $30 billion it lost in 2006, 2007 and 2008, it has recorded handsome profits for 3 years in a row. This in itself speaks volumes about the unmatched prowess and determination at Ford.
It is an undeniably uphill task to plough through the losses and breakeven in the current economic environment; a feat that Ford has achieved in a staggering 3 years. As a prospective investor, I find myself inherently attracted to Ford. Any canny investor can attest to the fact that the lineaments exhibited by Ford are key indications of a bright a future. I foresee an increased demand for Ford stocks at this precise moment. This unprecedented demand will stir a lot of shifts in share value which will ultimately lead to increased share price. The fact that everyone wants to buy and no one wants to sell will also suffocate the supply. This will equally magnify the demand which will inevitably lead to an increase in price.
Another factor that will greatly act in the benefit of Ford is the growing skeptical approach towards competitors like General Motors. A section of investors have crossed borders to the critic disposition. They argue that General Motors is an outright bad choice at the moment. Interestingly, I happen to agree with them. There is a predominating argument that its exposure to the European market will continue pulling down the sleeping giant.
In the previous fiscal year 2011, it is estimated that General Motors made losses of about $ 747 million; figures that are expected to rise this year. This is a boon for Ford. Assuming I had a crystal ball, I would say that most if not all of the investors in General Motors will flee. This situation will greatly benefit Ford as many prospective investors are looking for entry points into this promising stock. In a last ditch attempt to salvage its soiled reputation, General Motors is considering an alliance with Peugeot. I believe that this rushed move will further erode the confidence in General Motors shareholders. As earlier stated, there is a real possibility of Ford fishing out a large number of General Motors shareholders. An outgrowth of the government bailout is also suppressing General Motors efforts to get back on track. Currently, there is an outrage over the government's role in General Motors. In what critics and analysts term as 'dining with both devils'. The government is moving from the ownership camp to the regulation camp at its pleasure. These two camps are innately antagonistic. This will greatly affect General Motor stocks. In the long run, it is big wigs like Ford who will steal the dwindling number of shareholders in General Motors.
What about Toyota?
Toyota's overwhelming recalls are also going to act in favor of Ford. Just recently, Toyota's program to fix an error plagued control mechanism in exhaust systems of the swaggered Prius hybrid series came to light. To my astonishment, Toyota has coined an exceedingly fancy name for blatant failure- 'service campaign'. This so called service campaign will recall an estimated 28,000 vehicles with the bulk coming from North America.
This news only galvanizes the falling confidence that investors have in Toyota. In the event that confidence levels reach an uncontrollable freefall, there is a great possibility of mass migration to Ford; after all it is the only viable option at the moment, who wants to go to a perishing General Motors? Toyota has a bad history with recalls as this is not the only high profile recall in its books.
By February 2012, it had recalled an estimated 2.11 million vehicles in the U.S. These vehicles supposedly had faulty gas pedals. This recalling not only taints the image of Toyota but also drills a hole in its pocket. This is actually why its record sales merely deliver a net income of $2.8 billion-slightly above 10 percent of Ford's $20.2 billion. In my opinion, Toyota has given Ford the edge and it will pay dearly for this. Ford is not typical of passing out on chances, especially those that come on a silver platter.
At some point, I may have leaned too much towards the bullish side. There is an ongoing lawsuit against Ford. The titan is sued for an accident that took away the eyesight of Shaela Warkentin. Lawyer Warren Pajoobian says that the accident could have been less threatening if the Ford Mustang had tempered back window glasses and headrests- inexpensive enhancements. In as much as this news is a blow in itself, I believe that Ford will handle it maturely. In conclusion, I am confident that Ford's upward trend will continue.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.