Message Font: Serif | Sans-Serif
No. of Recommendations: 14
Rob: would you care to address this article. -- mitchjl


Short version: Instead of writing articles advising people how to invest, I'd suggest that he take up a career asking people if they would "like fries with that." He's another clueless babbler.

Longer version: The article cites a number of reasons Ford stock should be sold, divided into fundamental and technical reasons as well as alleging a lack of "rechargeable car sales". I'll ignore the technical reasons and address the others:

Reason 1: The first concern was Ford's cash pile dropping (year over year) by 8.7% to $15.66 billion. At the same time, the company's total debt increased by approximately 5% to $105.06 billion.

By itself, the reduction in cash doesn't mean much other than they used some. It may have been paying down debt or capital expenditures.... but a one year drop when they still have a large cash horde.... and continue to generate cash at a tremendous clip.... is not especially significant.

The other part..... adding in the total debt of Ford Credit.... indicates that he doesn't understand the bifurcated nature of the company into making/selling cars and financing cars. In an ideal world, you like to see the Ford Credit debt balance go up because they make money on each one they finance. It's more complicated then that because the production/sales arm uses incentives (through Ford credit) to juice sales, but I would note that Ford has been remarkably restrained on that and enjoys one of the highest margins in the industry.

Reason 2: For 2012, the company generated $126.6 billion in revenue, a drop of 1.25% from 2011. Additionally, the company's net income fell dramatically from 2011. Below are Ford's annual net income numbers for the past 3 years:

2012: $5.66 billion
2011: $20.2 billion
2010: $6.56 billion

This is why idiots shouldn't leave their village. The drop of 1.25% is basically flat. You'd rather have a nice fat increase, but flat isn't the end of the world when you consider they're continuing to invest in the future and the fact that they are currently struggling with those issues in Europe and South America. Those issues are a concern, but they'll fix them. It's a problem for short term investors, but not so much for those with a long term perspective..... because economic cycles are to be expected.

The second part of it should just toss out the 2011 number because it includes a one-time accounting gain. Just accounting, no cash significance. Yes, 2012 dropped from 2010. That's not preferable.... but mostly attributable to the European/South American problem that is being addressed.

Reason #3: In the earnings report, Tesla announced that it sold 4,900 of its Model S sedans. This sales figure made the Model S the top selling rechargeable car during the first quarter 2013 in North America. It surpassed the following leading automobile companies:

General Motors (GM) sold 4,421 Volt plug-in hybrids
Nissan Motor (NSANY.OB) sold 3,695 Leaf vehicles

What's troubling is that the Ford Focus Electric wasn't even mentioned. Even more concerning is that we can go back to total annual sales for 2012 of electric cars and Ford still doesn't make the list. The top 3 selling electric vehicles for 2012 were the Chevrolet Volt (owned by General Motors), the Toyota (TM) Prius Plug-In, and the Nissan Leaf.

With electric cars starting to gain momentum, it's troubling that Ford is well behind the curve.


....out of somewhere around 15 million vehicles being sold in North America (and ignoring far more than that globally), Ford should be sold because out of the millions they did sell.....they didn't sell several thousand electric cars?

From a financial standpoint, the arguement is just foolishness. Both GM and Nissan lost money on those electric cars. Tesla.... a more complicated story.

The author's "point" is that Ford is behind on important technology. Admittedly, the Ford Focus Electric has low sales. That's something they need to fix in the next generation vehicle because it's an opportunity (as Tesla is showing).

Just as importantly, Ford has jumped to #2 in North America with electrified vehicles. The distinction? Ford is upping the game with hybrids and is gaining a lot of ground on Toyota, the market leader. And, I suspect (data not available), making money on them. Isn't that also what shareholders want?

I'd like to see Ford come out with a serious.... and profitable.... electric vehicle but there has been no news I'm aware of on the subject. By the author's "analysis" and the financial results, I could only conclude that every car maker except Tesla is a sell due to their electric car sales (low numbers and profitability)...... but that opens the door to a whole different commentary.

Bottom line: Readers should examine their sources of news and analysis to see if they make sense.... and part of that process is understanding what is important. These boards can be an important source of education on that subject and, in time, we should all become more informed.

Print the post  


When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.