Featured Image of this Article

The Best-Performing Automaker Stock From Last Year

Old-timer Ford Motors was the real turnaround play in 2021 as it moves towards electrification — can it continue to be dominant this year?

The EV madness is neverending. One age-old company that we know and love is taking all the right steps to revamp its own business model too, and that’s Ford (NYSE: F). Shares of the automaker are trading at the highest levels in 20 years — it may even be on its way to surpassing its historic all-time high of $35.60 per share — a valuation the company hasn’t had since January 1999. 

Are Ford shares good value?

You might think that makes the shares look frothy, reapproaching historic highs. But, in relation to other EV competitors, a $95 billion market cap is a drop in the ocean. Not that shares look cheap, but compared to valuations attached to competitors like Tesla at $1.1 trillion, it’s not completely unreasonable.

As an example, let’s compare the two in their most recent quarters. Ford generated $35.7 billion in total revenue and $1.83 billion in net income, whereas Tesla posted $11.6 billion in total revenue and $1.6 billion in net profit. Now, I’m not saying it’s a perfect example. Tesla is a brilliant company in its own right with its fingers in many pies and with stronger growth, but EVs are its primary category, so it is worth considering. 

Could Ford be a real EV competitor?

Absolutely. The company is tripling its production capacity for its Mach-E sedan due to unprecedented demand and Ford intends to double production for its F-150 Lightning, for the second time. The traditional F-150 is America’s best-selling vehicle for the last 35 years, and demand far exceeded even Ford’s own forecasts causing the company to cap production at 200,000 units for now, but the intention is to expand production for the vehicle to 150,000 units per annum by 2023.

And it’s not just consumers Ford is after. Its upcoming electric lineup includes the best-selling commercial van in the U.S., the Transit, with this new-and-improved version arriving in 2022. The broad appeal will be in the fleet market, particularly for delivery companies.

So, despite supply constraints in the short term, the future looks bright for the automaker in its response to changing preferences and needs for both consumers and businesses. The company has identified its best-in-class when it comes to popular vehicles and more importantly, its most profitable vehicles; pickup trucks and vans.

Does Ford look like a good investment in 2022?

It shows the resilience of a brand that pioneered the auto category. This 100-year old brand is known across the world because of its heritage. This is a company that took the top spot for auto production compared to all other manufacturers in the U.S. in 2020, assembling more than 1.7 million vehicles that year.

Ford carries less risk than others as an investment, given its longstanding history and predictability when it comes to production. You’ll even get a $0.10 dividend per share. Ford also has an approximately 12% stake in Rivian, valued at roughly $10 billion, a pure-play investment in the EV sector. So, if you’re investing in Ford, you’re getting a little piece of Rivian too, albeit, without taking on the full exposure of the newly floated “disruptor”.

Maybe it’s not one for you. But as CEO Jim Farley says, “Don’t bet against Ford”, and I’d tend to agree.

Read More