In this sneak peek from the Action Alerts PLUS members-only December live show, AAP co-portfolio manager Chris Versace broke down why Ford is a stock you’ll want to own no matter the state of the economy.
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FULL VIDEO TRANSCRIPT BELOW:
KATHERINE ROSS: Now, I know that I’m going to get some cringes for this next question but I think it’s a fair point. Is 2023 the year that Ford CEO Jim Farley catches up with Elon Musk, especially since we all know that he’s got his hands full?
CHRIS VERSACE: He does have a handful. And if we do go into a recession, it could be a very challenging time. But I do think, if we look at really what they have done and have accomplished thus far, the reach to catch Tesla is a big one. But depending on the market share data that you’re looking at, Ford is a clear number two in the EV space, and that’s as its transformation continues to gain steam.
For me, one of the things I really want to see and understand is the real impact of this EV tax credit that goes in starting in January. To me, that could be the accelerant that really helps Ford grow and transform even faster. To me, that’s probably the biggest key that I’m looking for when it comes to Ford shares. And if we see great adoption in that, that could actually lead us, depending on where the share price is, to add more Ford shares to the portfolio.
KATHERINE ROSS: I’m so glad that you brought that up, Chris, because my thought here on Ford kind of goes back to what we were talking about last spring, which is when the gas prices were astronomical because of the Russian invasion of Ukraine. And now with this possible economic downturn being predicted, I’ve heard a lot of talk from sources and other people and on social media saying EVs may not be the right bet to make because people are going to be tightening their wallets. They’re not going to want to overspend or outspend on an EV, maybe look at a used car instead.
But your point is valid. And do you think that means that Ford and GM continuing to invest in EVs makes them not recession proof, but definitely a stock worth having during a recession?
CHRIS VERSACE: So when we look at Ford, we can use the dividend as a proxy and say, OK, we can be patient, collect these dividends while the company continues to transform. But you have to remember, too, that the average age of a car on the US road is around 12 years old. So there is this natural upgrade cycle.
So even if we hit a recession in 2023, we know that cars are going to continue to age. That probably means the average age grows to 13 years, 13 and 1/2 years, something like that. There will be a much bigger upgrade cycle.
At the same time, that EV tax credit is not just for 2023 years. I believe it’s around 10 years. So when we put those two things together and we start to see Ford realize more of the synergies in its transformation, that longer term, new Ford probably has more opportunity to shine in the back half of 2023, 2024. So given where the shares are, I think we’re inclined to be patient and let that play out.
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