Top picks 2012: Ford

As more confident U.S. consumers hit the showrooms, dividend-paying automaker is once again a bargain.

By TheStockAdvisors Dec 29, 2011 1:34PM
Image: Traffic (© Pixtal/SuperStock)This post is one in a series in which over 50 newsletter advisors share their Top Picks for 2012.  

By Nicholas Vardy, Bull Market Alert

Our top pick is all-American stalwart and success story Ford Motor (F) -- a bet on the American consumer and the burgeoning U.S. economic recovery.

Even as Europe struggles with its sovereign debt crisis, the news from the U.S. economy has been steadily improving.

The Institute for Supply Management reported that the U.S. manufacturing index rose to 52.7 in November, and that new orders and production both rose to seven-month highs.

The unemployment rate recently dropped to 8.6%. Consumer confidence has ticked up and U.S. consumers went on an auto-spending spree in November -- a normally weak month for auto sales.

With the average age of vehicles on U.S. roads hitting almost 11 years, pent-up demand resulted in an impressive 10.6% rise in seasonally adjusted annual sales (SAAS) to 13.6 million units as of last month.

That's up from a SAAS total of 12.28 million in the same month of 2010 and the highest SAAS rate since August 2009, when the U.S. government launched the "Cash for Clunkers" program. November was also the third-straight month when annualized vehicle sales topped the 13-million mark.

Ford itself posted a gain of 13.3% in November to 166,865 vehicles, driven by strong sales of trucks and SUVs. Its 16.6% share of U.S. vehicle sales in November was its highest in five years.

Ford's retail sales actually soared by an even more impressive 20%. Retail sales, as opposed to sales to fleets like rental-car companies and government agencies, rank as the industry's most profitable segment.

Ford itself expects industry-wide sales of around 13.5 million units next year.

Ford also announced that it would restore a regular dividend. Ford halted its dividend payment back in 2006 when markets were in turmoil. Restoration of a dividend payment is a good sign of financial strength.

Much of Ford's success has been thanks to its CEO Alan Mulally, who has prioritized profits over market share.

Coming from Boeing just five years ago, Mulally eliminated Ford's dividend and sold its non-core brands. He also shut down Mercury, focusing Ford on the mass market and Lincoln on the high-end car buyers.

He also raised $20 billion as a cushion against bad times that has served Ford well, while delivering nine straight quarters of pre-tax profits.

Ford was a darling of investors after the market bottomed in March 2009 but has actually underperformed the broader market since hitting a high of $18.71 in January of this year.

But with a price-to-earnings ratio of 6.56, and a turnaround in the U.S. car market underway, Ford is once again a bargain. So, bet on a U.S. economic turnaround and buy Ford.

Steven Halpern's TheStockAdvisors.com offers a free daily review of the favorite stock ideas of the nation's top financial newsletter advisors.

Tags: F
2Comments
avatar
Go Ford Go. It would be nice to see an american company in the top slot of selling vehicles once again. Nothing against the foreign auto makers, but when i buy a vehicle, it is going to be made in the good 'ol USA. With any luck, the newly designed Ford Fusion will become the better seller of all of the smaller, fuel efficient vehicles.
Dec 29, 2011 2:10PM
avatar
So how many shares do you own Nick?  Did you forget the China has slapped a heavy duty on all American cars, the euro zone is tanking, the charts show Ford dropping another 20% ($8.50), people will put off a car first if the economy stalls, Japan wants it's market share back and will discount to get it, Ford now has to pay a dividend it announced in the middle of a slow news day.

If you work with charts, you'll see that Ford is scheduled for a cliff dive this January.  I do not own Ford stock, but I own enough Ford Puts to retire again if it breaks below 10.  I'm thinking February.
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