In the world of auto stocks, Ford Motor Company (NYSE:F) is one firm which gives many investors nightmares due to its checkered past and catastrophic decline 10 years ago. A bailout, new management team, and one of the longest bull markets in history have taken Ford from the brink of disaster to a profit-making machine with one of the best valuation multiples on the market today.
The company’s 6.3% dividend yield is certainly nothing to sneeze at, and the firm’s balance sheet, margins, and most operating ratios are the best they’ve been in recent history. Yet, it appears young investors in the auto space prefer disrupters such as Tesla Inc. (NASDAQ:TSLA) over the original American car brand, valuing the hip and flashy over the trusty old profitable car maker.
On a fundamental level, a long-short strategy (long Ford, short Tesla) is a no-brainer to me. Other experts such as Steve Eisman have already initiated such plays – finding real value and shorting the fat in the market should be the goal of every investor today.
Doing so may appear “risky” at this point in time, but rest assured the markets will return to normal and the current hysteria of a bull market on steroids will in time make way for a bear. How scary of a bear remains to be seen.
Whether the world has seen peak auto yet aside, Ford is a company which is currently pumping out profit at an amazing rate – buying shares in Ford today provide investors with an expected payback of just over 15 years (based on dividend alone), trading at right around book value and less than six-times earnings.
Invest wisely, my friends.
