Ford stock (NYSE: F) has been trading at $12 per share, significantly below its pre-inflation shock high in January 2022, but with potential for growth. Despite struggles with supply chain issues, the semiconductor shortage, high interest rates, and weak consumer confidence, Ford did see some positive results in Q1 2024 driven by its Pro business serving commercial customers. While the stock has shown gains over a longer period, its performance has been inconsistent and it has underperformed the S&P 500 in recent years.
The Trefis High Quality Portfolio, consisting of 30 stocks, has consistently outperformed the S&P 500 over the same period. The reason for this outperformance lies in the fact that HQ Portfolio stocks provided better returns with less risk compared to the benchmark index. As a result, investing in a diversified portfolio could potentially yield more stable returns.
In the current uncertain macroeconomic environment with high oil prices and elevated interest rates, there are concerns about whether Ford will face similar challenges as it did in 2022 and 2023. Tailwinds for the company include strong demand for trucks and SUVs, as well as a cooling in the EV market which could give Ford more time to focus on its gas-based vehicles while investing in electric vehicle developments. Ford’s valuation is estimated to be around $15 per share, indicating potential upside.
The timeline of the 2022 inflation shock shows the challenges faced by the economy, which have impacted Ford stock and the broader market. However, there are similarities to the 2007-2008 crisis as Ford stock experienced significant declines but ultimately recovered. Ford’s fundamentals have shown resilience, with revenues rebounding strongly in 2023 and earnings improving. The company also appears to have a healthy financial position to meet its obligations during the ongoing inflation shock.
In conclusion, Ford stock has the potential for gains once concerns about a potential recession are alleviated. The company’s performance may be impacted by automotive demand and pricing in the near term. Investors looking to capitalize on potential gains in Ford stock may consider a diversified investment approach with a focus on quality stocks to mitigate risk. Overall, Ford’s performance in the coming months will be influenced by various macroeconomic factors and industry trends.
