Our Biggest Gainers & Losers of the Day in the $100,000 Build Portfolio

For the 25th September 2024:

Ford can’t catch a break lately. Now Morgan Stanley have piled on & cut their price target to $12. Cue the 4.38% drop today.

The good-ish news is that even with the cut price target that’s still a 15%+ gain. The better news is that I think Morgan Stanley have been a bit harsh. Even better news is that if you forget all the price targets there’s 7.5% dividend yield from Ford right now.

Before I give a final verdict, let’s take a closer look at what’s been going on with Ford lately.

Ford’s stock is currently priced at $10.42. It’s flirting with a support range it made earlier this month on the hourly chart which bottoms out at around $10.15.

When we saw this level at the start of the month, the RSI told us the stock was oversold & it rallied over 10%. Well price is a little higher this time around & the RSI is already tell us Ford is oversold.

From a technical perspective, if price holds & breaks above the 20 period EMA, a buy entry should be a little safer.

But if it does break below $10.15, it could get a little shaky.

Next stop would likely be closer to $9.60 which is still 7% away so if you’re looking for a short term play, waiting for a bullish break above the EMA is going to be the play.

If you’re more of a buy & hold kinda guy, technical’s can help you get a solid entry but the fundamentals & recent developments ultimately dictate where price is heading.

So how do those look?

One of Ford’s biggest problems right now is the strike by the United Auto Workers (UAW) that all kicked off this month.

The targets were initially the “Big Three” - Ford, General Motors & Stellantis. Fun fact, General Motors also got a downgrade from Morgan Stanley today & tanked nearly 5%.

Anyway, the union are pushing for things that are all pretty reasonable. Higher wages, better benefits, improved working conditions.

But what it means for Ford is they’ve had to pause production in a bunch of factories in the mean time.

Less operational factories means they aren’t building as many cars or trucks as they usually do.

Less production = less money coming in.

As an investor I can see why you’d be a bit worried about how that’s going to show up on the earnings reports & dump the stock.

Personally, I love short term noise like this. Things that seem less than ideal in the moment but nobodies even going to remember this time next year. It can give you great entries for not that much fundamental downside risk.

That’s the bucket I’d put this event in. The “Everyone else is scared so I get a discount” bucket.

The other storm cloud floating around is the electric vehicle division.

Ford’s been putting a lot of money into building EVs but they’re running into some roadblocks. They’ve had to lower their production targets because there isn’t enough demand. But that’s not just a Ford thing. The EV market as a whole has slowed down a little. I don’t think they’re as trendy as they once were.

Sprinkle in some supply chain issues & the high hopes for EV production & supply just got popped.

To make matters worse, they’ve not made a dime from it yet. In fact, their EV business is expected to lose around $5 billion this year. When you’re in the arena with companies like Tesla who’ve already figured out how to make their EVs profitable it puts you in a tough spot.

As it stands, Ford aren’t looking to fold in the EV space just yet. I think that’s a fine choice as long as they’re able to take a dynamic approach & don’t turn it into a cash furnace.

But it’s not all doom & gloom…

Here’s something positive!

Ford Pro focuses on selling vehicles to businesses. Think delivery vans, work trucks, etc.

It’s on track to do $70 billion in revenue by the end of 2024. Ford Pro is actually a lot more profitable than selling cars to regular consumers.

What makes this division a cash cow with better margins & more reliability is the fact it doesn’t just sell vehicles. It sells the parts & services the vehicles need. Win-win!

And the best part? It’s a division that’s growing for Ford.

Because of that, Ford Pro is a huge part of what’s keeping Ford’s overall business stable so they have the buffer to experiment in other areas for future growth. AKA blow a bunch of cash getting their EV division off the ground.

So where does that leave us?

At the start of September I sold half of my position in Ford with an 11% profit. I culled it because the position size was a little large (nearly 2% of my total portfolio) which turned out to be a pretty smart move.

I’d love to say I’m a genius but the timing was mostly luck.

It currently makes up about 0.75% of my portfolio. My price target for Ford is $13 which is a 25% upside from current price. If price falls back into single digits, I’ll definitely be adding more & getting closer to the 2%.

Even you take the (likely) smarter guys opinions at Morgan Stanley & shoot for $12 you’re still looking at 15% upside. And if you add in the fact you’ll get a 7.5% dividend yield which covers the likely downside from current price it definitely seems worth the punt.

The UAW strike & struggles with EV production are definitely a thorn in the side for Ford right now, but they’ve got a solid business in Ford Pro that’ll give them a life jacket for a little while yet.

My official verdict for right now would be a tentative buy with the expectation that you might see some draw down before we move back up. Price keeps dropping without the wheels falling off the fundamentals? A more confident buy. And if you’re already in like me, then just buckle up & hold.

It’s never too late to learn how to master the stock market.

You’ll receive daily trade alerts sent directly to your phone and email detailing the hottest stock picks.

The best part? There’s no cost to join!

Expert insights will be at your fingertips instantly.

Subscribe Now for Free

That’s all! See you same time tomorrow 👋

P.S Hit reply & let me know what you thought of today’s newsletter. All feedback is welcomed ❤️