The biggest position of our portfolio, Ford (F), has declined ~20% from its 52-week high of $25.87/share to now $20.39/share as of yesterday's close. We predicted such sharp downside move would eventually happen at some point, as shares have rocketed ~108% from trough to peak since September 2021 to just a few weeks ago. As such, we've lightened up our Ford position at the highs, decreased the weighting in our portfolio from 25% to 12% as the move up occured. With shares having fallen so sharply, coupled with the broader market being at oversold conditions, we believe it is time to nibble at some F shares. Yesterday, we brought the allocated weighting of Ford in our portfolio to 18%, as we were able to get in at a very attractive price of $19/share. In today's post, we will make a case why you should be buying Ford right here.

1. Fundamental, Valuation: 

We believe 2022 is one of the most exciting year for Ford. This spring, they launch the hotly-awaited all-electric pick-up F-150 Lightning. Even though they haven't delivered any of this product, they have received nearly 200,000 reservations, demonstrating strong demand for the product. We think it is not so much about how well the product will sell, but mainly about i) how many cars will Ford be able to produce per year, and ii) whether customers like this product once they have been rolled out. 

On point ii), this is something we will have to wait and see, but we should have some trust in the ability of Ford to please its customers - they are one of the oldest and most experienced automakers in the world after all. This is not the first electric vehicle that Ford produces - they have done an incredible job with the electric Mustang, which sales totalled 27140 vehicles in 2021, America's second best-selling full-electric SUV behind Tesla's Model Y. However, more importantly, we know how strong of a product the F-150 is. Ford's F-Series pick-up truck is America's best-selling vehicle for 40 straight years. When they are able to make a stronger, smarter and cleaner version of this product, we believe the market will take it very well.

Point i) is worthy of discussion. It is important to understand that the current sentiment on Wall Street towards EV companies is not so much about how well their products sell, but how many products are they able to deliver per year, as supply bottlenecks still loom. Particularly for Ford, we see an opportunity here. On 4th Jan 2022, Ford announced they will double F-150 Lightnight production to 150000 units annually. This sent shares from $21.77 at previous close to $24.31 at close of 4th Jan. However, now, Ford shares are trading at ~$20/share, even lower than before we received a positive catalyst. This means you currently have the opportunity to buy before the good news was announced.

An increase in production capacity likely means an increase in earnings. However, analysts' earnings estimates for Ford in FY2022 have largely unchanged since Ford's announcement, with mean estimated 2022 EPS at $2.04/share (high of $2.35 and low of $1.54). We believe that analysts will have to revise their estimates towards $2.3 if not soon then after when they hear more from Ford on Thursday, 3rd Feb 2022 (earnings date). Let's say we will be dealt a $2.3 estimated EPS for FY2022. Applying a 10x P/E multiple for 2022, this would place the share price of Ford to be at $23/share. Taking a peak into 2023, analysts have estimates for Ford at $2.31/share, so our $23 price target for Ford is supported by a 10x P/E multiple for 2023. However, it's still very early for analysts' 2023 estimates to be correct, therefore this number should be taken with a grain of salt.

2. Technical: 

3. Buyers: 

Back in December, Chairman Bill Ford bought 412,500 shares at 20.62$/share. Insiders sell stocks for various reasons, but there is only one reason why an insider would every buy stock: to make money. This is a sign that the most important insider of Ford (Chairman of the Ford Motors Company - Bill Ford) sees value and an opportunity to make money in this company. If Bill Ford thinks around $20.62/share is a good level to add to his portfolio, then we believe it was right for us to pick up more shares of Ford yesterday at $19, and for subscribers to get constructive on this name at $20. 

Bottom Line: We believe if subscribers have been waiting to start or add to a position, this is the right time. However, as always, don't buy all at once and be ready to add more on the downside. 

Programming Note: In observance of Lunar New Year, we will not be writing and providing updates for the remainder of this week and next week. We will be back in the first full week of February.