This Suddenly Cool Company Should Be A Cool Double

23 | By Michael A. Robinson

It was early 1981 and the so-called “Big Three” U.S. automakers were all on their backs. Chrysler Corp. barely dodged bankruptcy – thanks, in part, to $1.5 billion in federal loan guarantees, and Ford Motor Co. would incur $3 billion in losses during a four-year run that ended in 1982.

Chrysler, General Motors Co. and Ford were getting their clocks cleaned – by Japan.

Knowing that California, as a trend-setter state, would be a good place to assess how the U.S. carmakers were faring against the Japanese small-car juggernaut, my newspaper had sent me out from Detroit to assess the outlook for America’s once-dominant Big Three.

From the time I landed at Los Angeles International Airport (LAX) it didn’t look good. The number of imports I counted in the LAX parking lot was dwarfed by the number I saw on the LA freeways.

And in a stunning bit of candor, California Gov. Jerry Brown told me that the future looked bleak for Detroit.

Very bleak.

As we all know, the Big Three ultimately beat back the Japanese threat, and weathered several lean periods that followed.

Then came the financial crisis of 2008-2009, and the “Great Recession” that followed. Two members of the Big Three followed the example set by the nation’s biggest banks and accepted government bailout handouts.

One automaker did not.

That company opted to go it alone. It has transformed itself into a high-tech powerhouse, is grabbing market share back from the top Japanese nameplates in their “home market” of California, and just this week unveiled a superb quarterly earnings report and boosted its forecast for 2013.

This company’s stock is up 72% over the past year, but don’t let that scare you off.

The share price of this surprisingly high-tech (and suddenly very cool) company could easily double from here …

From Rust Belt to Really Cool

Most investors look at domestic autos as low-tech creations from America’s “Rust Belt.”

Nothing could be further from the truth. As someone who has toured and closely inspected auto plants throughout the world, I can assure you that today’s cars are rolling beds of advanced technology.

In fact, as one of my colleagues here at Money Map Press remarked earlier this week, had you been pulled over 40 years ago driving a car with today’s sophisticated telecommunications, sensing and GPS-navigation technologies, you might very well have been arrested (and perhaps even shot) as a spy.

From in-dash “infotaintment” systems to advanced sensors to embedded microprocessors and software, modern vehicles are basically four-wheeled computers capable of conducting some very complex tasks.

And that’s why we like Ford Motor Co. (NYSE: F), an automaker that’s come full circle.

It was Henry Ford, after all, who changed the world with his mass-production techniques and made U.S. autos the envy of the world.

Ford has become so technically adept these days that the company is grabbing back market share everywhere – including here in California.

In Northern California, Ford’s sales volume is up roughly 35% measured through the first half of this year. That is nearly four times the overall U.S. market’s gain of 8.4% for this year’s first two quarters.

But those numbers actually understate the success that Ford’s blend of high-tech and eco-friendly vehicles is bringing the company.

Just look at how it’s doing in California with its plug-in C-MAX Hybrid. The small electric vehicle is stealing thunder from the Toyota Prius, the former industry darling.

Here in California, Ford says, the Prius is the number one trade-in for a C-MAX.

And buyers just rave about the Ford hybrid…

“I loved my Prius, but when I test drove the Ford, it was insane,” Erin O’Malley-Minchell recently told the The Wall Street Journal. “Everything about it was that much better than the Prius.”

That kind of word-of-mouth advertising for the C-MAX helped Ford quadruple its slice of the U.S. electric-vehicle market in the past year to a 16% share.

When I look at Ford as a tech play, I can’t help but think of that Fabio commercial for “I can’t believe it’s not butter.”

Only we’re saying, “I can’t believe it’s a tech stock.”

A “Dash” For Cash

Of course, Ford’s sales success isn’t limited to a single line or vehicle type. In fact, it has a new tech system that enjoys such wide appeal across all its models that its research says is a key influencer with 70% of the folks who go with Ford over competing brands.

Ford calls the platform “SYNC.” It’s an in-dash “infotainment” system that is among the most advanced of any mass-market auto firm. To develop SYNC, Ford began collaborating with Microsoft Corp. (NasdaqGS: MSFT) five years ago.

As such, SYNC relies on a version of the Windows operating system specially designed for cars and light-duty trucks. SYNC turns a Ford’s dashboard and steering wheel into a sophisticated gateway for phones and digital music players. SYNC also includes voice-activated, GPS-based navigation and Wi-Fi connectivity on some models.

The success of Sync systems caused Ford to make a recent high-tech acquisition that will help it develop this technology even further. The auto maker bought Livio, a startup based in the Detroit suburb of Ferndale.

Ford wanted Livio’s expertise in streaming information to give it a technical edge against competing brands. Between now and 2018, Ford is expecting a tenfold increase in the number of vehicles with this kind of tech integration, up from roughly 2 million last year.

Meantime, Ford is pushing the boundaries of self-parking technology, particularly at the lower end of the market. Its Ford Focus model is the least expensive car available with parallel-parking assistance.

With this feature, the driver switches on the system while the car is moving at low speed. The Focus then scans for a place to park. Once the onboard sensors find one, the driver brings the vehicle to a stop and gives up control of the steering wheel and watches as the car swings into place.

Super Tech, Super Cheap

If you want more proof that Ford has gained respect as a tech player, check out a story that’s been making the rounds: Ford CEO Alan Mulally’s name keeps coming up as possible successor to Microsoft CEO Steve Ballmer when he retires next year.

That would make Mulally the first outsider ever to run Microsoft. On paper, at least, the idea makes sense. Before joining Ford, Mulally was a senior executive at The Boeing Co. (NYSE: BA), the global jetliner leader that’s made sophisticated aircraft technology a hallmark of its success.

Mulally won’t discuss his plans beyond his commitment to Ford through the end of 2014. However, if Mulally does move to Microsoft, I don’t expect it to hurt Ford’s chances over the next few years. At 68, Mulally likely wouldn’t stay much beyond next year anyway. And any CEO worth his salt devises a succession plan and develops talent to fulfill it.

The bottom line is that Ford has become a great stock comeback story. In the depths of the Great Recession in early 2009, the stock traded in the $1.50 range. It’s up more than 700% since then to around $17.50 a share.

If Ford shares just returned to their high of roughly $35.15 a share established back in April 1999, the stock would almost exactly double. By harnessing high tech, Ford has become much more of a growth company.

And there’s every likelihood that could happen. Because the stock is flat out cheap. It boasts a Price/Earnings to Growth Rate (PEG) ratio of 0.76. Anything below 1.0 is a signal that a stock that’s trading on the cheap.

And here’s another: Ford shares trades at 10 times forward earnings, a discount of more than 40% discount from the market. It has a return on stockholder’s equity (ROE) of 33%, more than twice the 15.5% rate for Google Inc. (NasdaqGS: GOOG).

To me, Ford qualifies as a tech investment because it is using technology to improve the quality, safety, reliability, and fuel economy of its vehicles — not to mention making them more user friendly in a world where just about anyone buying a new car these days is already computer savvy.

Our mantra here at Strategic Tech Investor is that “the road to wealth is paved by tech.”
Recommending an auto stock as a “stealth tech stock” is probably the best (and most literal) affirmation of that statement that I’ve seen.

And if contributes to your wealth – as we believe it will – it will also be one of the most rewarding recommendations that we’ve made.

See you all next week.

[Editor’s Note: I want to personally thank you all for the number and array of comments and questions that you’ve contributed in the past few weeks. This is very much an interactive process, and the more you participate, the better that process seems to work. As you see, we’ve made a concerted effort to respond to as many of your postings as possible. And make no mistake: The publisher takes note of your support. And that will all enable us to add some new features to Strategic Tech Investor. Keep them coming. Please take a minute to write your comments below now.]

23 Responses to This Suddenly Cool Company Should Be A Cool Double

  1. Noel says:

    I love Ford products and my previous two vehicles were my 2004 Mustang and 2011 F-150. With the economy as it is, I decided to trade in the truck for a C-MAX and haven’t regretted the decision one iota; I’m averaging 40.4 mpg. Also, the SYNC system does exceptionally well and almost makes me feel like I’m in a cockpit.

    • Michael Robinson says:

      Hi Noel,

      That’s awesome. Great to hear from a Ford user with such a positive experience. As for me, I just love the redesigned Explorer, which I bet doesn’t get near the mileage you do on the C-Max. Thanks for sharing this with me.



    • Larry Johnson says:

      The 2nd day I bought the Ford stock, the consumer report came out and says 5 of the 10 least reliable vehicles are made by Ford! What can I say? It may be a great company, but come on?

  2. David Keller says:

    Ford is the only American car I would ever consider buying. GM makes junk and Chrysler is not far behind them now.

    • Michael Robinson says:

      Hi David,

      Well, as the sales stats who, a lot of people out there are more impressed with Ford than with the other two U.S. auto firms.



  3. edward robinson says:

    In this dreary misery time of negativity, it is exciting to read about Ford’s successful turnaround!

    Now, if we could get the government straightened out!

    • Michael Robinson says:

      Hi Edward,

      Thanks for contacting me. Much appreciated. Yes, it is great to see such a storied firm come back to life. Cheers,


  4. Peter Marks says:

    Thank you for picking a U.S. company with both domestic and foreign sales as this is the “Age of the Global Economy”. The current and future emphasis for trade with other nations is and will continue to be geared to equal trade rather than the U.S. importing more than it exports. Ford has geared itself to be a part of this equal trade by selling vehicles, building manufacturing plants, and having parts for Ford vehicles stored in warehouses in foreign nations. The “New Ford” has the top executives who learned from the mistakes of the past and they and the workers are all on board to bring Ford into this “Age of the Global Economy.” The advent of EV’s (electric vehicles) and the advancement of battery technology is the game changer for Ford and I can see Ford soon having an EV which will get over 200 MPG and sell at a price lower than $35,000 and sales will sky rocket.

    • Michael Robinson says:

      Hi Peter,

      Thanks for sharing your thoughts with me. I agree about Ford and the global aspect. Most folks aren’t aware that Ford of Europe made outstanding cars years before the company found the same success here. I remember driving a European Escort in the backroads of England many years ago as part of my tour of overseas auto plants. What a great ride that was.



  5. Jim Hyde says:

    Thank you for this assessment of Ford’s progress. I recently completed a 1,200 mile trip in my Honda Fit. I saw a lot of small Fords on the road. I could not help but be impressed with the performance I witnessed. I am one of those Americans who has been unimpressed for decades with what comes out of stodgy old Detroit. I hope that they continue to sway my opinion.

    • Michael Robinson says:

      Hi Jim,

      Thanks for taking the time to share your thoughts with me. Honda and Toyota are having a much tougher time out here in California going head-to-head against the “New Ford.”



  6. Antonio Ranalli says:

    Can you make your comments/recommendations “printer friendly”? Sometimes I like to print your report to read it on the bus/train on my way home. Thanks.

    • Michael Robinson says:

      Hi Antonio,

      Great question, and I will send it to our web team to see what they have to say about it. Just so you know, after reading your query, I printed out this column on my HP laser jet and had no issues. Now them, I’m on a Mac using Safari and the column printed from this website with the logo, my pic and our company header at the very top of the page. Otherwise, really, it was pretty seamless. I’m just wondering if you have tried this? Either way, as I said, I’ll send a note to the web team right away.

      All best,


  7. Albert Rall says:

    Here’s a thought, Lets impose a $100.00 tax on every foreign vehicle every year, maybe $50.00 for everyone made the USA and apply this money to the socialistic Oboma care program. You think cars have nothing to do with health care, well nor does many of the ways he wants to tax citizens. I wrote all of my congressmen and asked them , If this is such a good bill why is the president and all of congress exempt? None utter a word in reply. It’s hard to imagine anyone making such a ignorant, stupid statement as [ We have to pass it and then we’ll look what’s in it.] She should be tarred and feathered and run out of office for such a statement. But then if you run everybody out of office for being corrupt, incompetent, and the alike there wouldn’t be many left.

  8. Frank says:

    When the auto companies asked for a bail out why did Ford say they would seek bankruptcy protection? Because they found a way out of a major lawsuit after dumping toxic waste in abandoned mines even on the land people getting sick How did they get away with this telling the SEC they would claim bankruptcy protection then profiting huge I will never buy their stock or their product for behaviour like that

  9. Peggy Hoffer says:

    Fortunately or unfortunately, I read too many newsletters, so I can’t even remember where to look to find a report I read about autos. In essence, all the carmakers are making too many cars and will be in trouble again (especially GM…maybe it was a Stansberry article). In other words, too much supply and soon too little demand. That’s the reason I’ve watched Ford soar all year, but was afraid to invest. I love Ford, but somehow the article I read just made sense. I see a major crash sometime in the not too distant future (and I’ll still be alive) and durable goods/autos will be one of the first down the hill. With that in mind, should I invest in Ford or MELI?

    • Michael Robinson says:

      Hi Peggy,

      Thanks for contacting me with your comments. I appreciate the vote of support. With any stock you buy, be sure to protect your capital and profits with either a stop loss or a trailing stop. People who did that got through 07/08 in overall great shape. As regards Ford and MELI, I like them both for different reasons. Hope that helps.



  10. charlie thomas says:

    I enjoyed reading this article and hope that Ford will link this system with GPS so that the vehicle itself will auto-drive and park at the destination and relieve the driver from driving in an unfamiliar city. I also agree with you that with Ford FOCUS and other models, the company is an ideal investment option especially when the US economy is in an upward trend. Thanks for the article.

    • Michael Robinson says:

      Hi Donald,

      Thanks for taking the time to contact me with your question about graphene. Graphene is just now starting to become an ingredient for certain uses. For instance, Head has announced a new line of tennis rackets incorporating graphene, and there is a great video on the Web showing tennis star Novak Djokovic using the Head graphene racket.

      Along those lines, I’m starting to see some companies say they are using graphene as a competitive ingredient. Powerbooster Technology, which is based in Shanghai, says it has developed graphene-based flexible touch-panels for mobile devices but as I understand it those are not yet ready for market. So, we’re still in the early stages for graphene but once it hits critical mass, the field will really take off. I’ve written extensively about graphene in the past, and perhaps it’s time to work on an update. Keep an eye out.



  11. Maurice Griffin says:

    Thank you very much for your informative well written articals.I value your opinions and advise very much

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