Investing: Ford holds promise, but auto industry poses challenges
Question: I am a Ford Motor Co. shareholder. Can my shares continue their upswing?
Answer: Prospects are good, but there are challenges: The auto industry is cyclical, meeting higher fuel standards will be expensive, and labor will look to gain from the company’s improved fortunes.
And despite improved quality and a more upscale image, the seller of Ford and Lincoln brands still must combat the belief held by some Americans that foreign vehicles are superior.
Ford was the only major U.S. carmaker to avoid a federal bailout and Chapter 11, despite losing $30 billion from 2006 through 2008.
On Friday, the company posted 2010 earnings of $6.6 billion, the most in 11 years and more than double its 2009 profit. In a sign of its improved balance sheet, the firm’s automotive operations ended the year with more cash than debt.
Because the results were not as good as expected, however, Ford’s shares sank 13% on Friday. That left the stock down 3.1% so far this year after gains of 68% last year and 337% in 2009. Ford’s Class A shares are available to any investor. The Ford family’s Class B shares give it a 40% voting stake.
Ford’s overseas operations hold promise. Its India unit had a nearly threefold sales gain in 2010, while its China unit posted a 40% increase. The firm is in preliminary talks with Beijing to export more North American-built vehicles to China.
The company placed highest among the high-volume vehicle brands in J.D. Power’s 2010 study of initial quality. In the U.S., its F-150 truck, Fusion, Fiesta and Focus are especially popular.
The fully electric Focus makes its debut late this year in the U.S. and next year in Europe. It will be built on the same Wayne, Mich., assembly line as the gasoline version of the car. By 2013, Ford will offer five vehicles that run on electricity, including hybrids.
The consensus analyst rating on Ford shares is a “buy,” according to Thomson Reuters, consisting of four “strong buys,” seven “buys,” seven “holds” and one “underperform.”
Yacktman fund is less affected by bubbles
Question: Please advise me about my shares of Yacktman fund.
Answer: This portfolio of fewer than 50 stocks has been a longtime winner for Donald and Stephen Yacktman, the fund’s father-and-son management team.
It holds up particularly well in market downturns. Its cash component, currently 10% of assets, can run as high as 30%. It owns shares of giant consumer-product and pharmaceutical companies as well as large media firms.
The fund returned 17% in the last 12 months, ranking it below two-thirds of funds that focus on large “value” stocks. But it ranked at the very top of its category over the last three years, five years and 10 years, posting double-digit annualized returns in each of those periods.
“This is one of the best-performing funds we cover,” said Ryan Leggio, mutual fund analyst at Morningstar Inc. “An investor who wants decent long-term returns in the 7-to-9% range would want the Yacktman fund, even though it might lag in a speculative bubble because it won’t be chasing after stocks.”
The fund, with annual expenses at 0.93% of fund assets, requires a minimum initial investment of $2,500 but imposes no sales charge on purchases of fund shares.
Andrew Leckey answers questions only through the column. E-mail him at yourmoney@tribune.com.
