The Experts’ Best Idea For 2022

In the 38^th annual MoneyShow Top Picks report for 2022, one of the most popular investment sectors is companies related to the growing market for electric vehicles. Indeed, of the 118 stocks in this year’s feature only one stock earns the top buy rating from 3 separate advisors —Ford Motor Company (F).

Kirk Spano, Fundamental Trends

We first invested in Ford Motor stock at single digit prices, after I attended the 2020 Consumer Electronics Show, where I saw the Mustang Mach E and the company’s robots. Though Ford is not just a car company anymore.

I believe that Ford will become a larger producer of EVs than Tesla (TSLA). Why? They have a built-in fan base. Millions of loyal customers will buy the Mach E over a Model Y, and an F-150 Lightning over a cybertruck. I’m waiting for an electric Ford Explorer which will debut in 2 or 3 years.

Meanwhile, there’s a lot more to Ford. Its “4th Industrial Revolution” technology is on the front edge of making Ford a high-end manufacturing powerhouse. Evidence that they were able to pivot to making ventilators in 3 weeks during the Covid pandemic. This exciting aspect of Ford is completely unrecognized by investors and most analysts.

The company is also sitting on a huge portfolio of valuable real estate. Again, investors and analysts are not valuing this part of the company properly. Frankly, they are not valuing it at all in the share price.

With supply chains for various high-end manufacturing moving back to America, Ford’s real estate is becoming more valuable in general. But there is more to the story. ICE vehicles take less manufacturing space. So, Ford’s real estate can be transformed into other uses. Certainly, some will be sold to generate cash.

Another opportunity for Ford’s real estate is to use their Industrial Revolution tech for joint ventures and new manufacturing opportunities. Think of this as maximizing the return on floor space of a store. I don’t know what deals are coming, but their tech too valuable for there not to be more deals soon.

Ford has been improving their balance sheet for several years, including finding more favorable debt conditions, including pushing two-thirds of maturities out long-term. A benefit is they have been able to spend on massive capex for the EV transition without raising debt the past four years.

The company now sits on a cash pile of $46 billion which equates to $11 per share. That was enough to reinstate their dividend for 2022 and extinguish more high yielding debt. I expect Ford to start buying back significant amounts of shares by mid-decade. Frankly, Ford is becoming a shareholder yield dream.

Market conditions, Covid and execution risks can certainly send shares down short-term. I would view any dip in Ford shares as an opportunity to increase holdings or scale in if you don’t own any.

Millennials have taken an interest in the stock, which is very important for future share price. I have a 3- to 5-year price target on Ford of $100 based on a future market cap of around $400 billion and 3.9 billion shares outstanding.

Alan Newman, Crosscurrents

We are as excited as the next person about developments in the electric vehicle market. I have owned or leased several hybrids and EVs in the last few years and believe very strongly that within 15 years, it will be very difficult, if not impossible, to buy a new gasoline powered vehicle. The future belongs to EVs.

Unfortunately for investors, the excitement level is pitched so high, the field is rife with EV companies laughably overvalued by the market. We hasten to point out Rivian Automotive (RVIN), which some weeks back was valued by the market at $150 billion, almost as much as Ford and General Motors (GM) combined, while not yet having sold a single vehicle.

We believe speculators are missing the mark by ignoring conventional automakers, who are already manufacturing EVs and in fact, have experience dating back several years. In the case of Ford, their experience goes back a full decade, commencing production of the Ford Focus electric in December 2011.

By 2023, Ford intends to produce 600,000 EVs annually, and has announced plans for a giant new electric truck (here’s looking at you, Rivian) and three new battery gigafactories. This growth would make Ford the second largest producer with a stated objective to be the world’s largest manufacturer of EVs.

Ford has already introduced four models of its perennially popular Mustang, starting at $43,895, competitive with Tesla. In fact, you can build-and-price an EV Mustang today online but there is a 20 week wait. Frankly, the full immersion of Ford into the EV market is quite exciting and we believe their experience is highly undervalued asset by the stock market.    

 Jon Markman, Strategic Advantage

Ford Motor — a Top Pick for the coming year — is a business redo with huge implications. Under Jim Farley, chief executive officer, the Dearborn, Mich.-based automaker is finally embracing electric vehicles. Ford began electrifying the F-150 in early 2020. Called Lightning, the truck is supposed to launch in 2022 and in every way, it will be a giant step up from its internal combustion cousin.

The Lightning will have more cabin and cargo space, better towing capacity, acceleration and contractor friendly attributes like 11 120-volt electrical outlets. It means never again having to carry a generator to job sites.

However, the big story at Ford has been Mach-E. Inspired by the Mustang, the SUV has been a hit everywhere it has launched. Like Tesla, the Mach-E is a blazer, racing from a standstill to 60 mph in only 3.5 seconds. Unlike Tesla, Mach-E is a visual stunner. The SUV takes it head-turning good looks from the famed pony car. And the vehicle is sold out everywhere. Dealers that manage to get supply are selling Mach-Es for a hefty $12,000 premium over the list price.

Farley says that Ford will increase production for the Mach-E to 200,000 units per year by 2023. He also claims, according to an Automotive News story, that by the end of 2023 the company will reach overall EV production of 600,000 units.

While analysts worry about semiconductor shortages and the global supply chain, Ford is changing from a legacy automaker to an EV company. Shareholders will benefit from all of the new valuation metrics this transition entails. Production increases, even from small baselines will lead to higher prices. The same is true for new battery agreements, executive hires away from Tesla, and EV model reveals.

Ford shareholders are on the verge of getting the same investor love that launched Lucid (LCID) and Rivian to nosebleed levels. It’s a completely new way to value the business.

Lucid will produce on 20,000 EVs in 2022 and 50,000 in 2023, according a report at Reuters. Its market capitalization is $63 billion. Despite this, executives have found no shortage of willing investors. The company raised $1.75 billion in November with the sale of convertible senior notes.

The market capitalization at Rivian, an electric truck maker backed by Amazon (AMZN), is even more audacious. The Irvine, Calif.-based company has no current sales, although preorders for its pastel-colored trucks have now reached 55,400. The market cap is $103 billion.

At only $88 billion Ford is a bargain. Shares currently trade at 11x forward earnings and 0.7x sales. As the company makes the transition to EVs by 2023 the stock should trade at 2.0x sales. The math implies a near triple from current levels.

The coming year is going to be all about getting back to normal. For businesses this will mean stable supply chains. Investors should pay attention to the companies that adapted during the global pandemic and remade their models. Ford is ready to fit into a new valuation. During the course of this year, I expect a big rally for the stock.