Ford Motor Company (F) — a fallen angel that has been a long-standing recommendation in our model portfolio — was our Top Pick at the start of the year; the stock has since risen 75%, notes Jim Powell, international investing expert and editor of Global Changes & Opportunities Report.
Over the years I have received excellent returns from blue chip companies that ran into trouble for one reason or another -- and their stocks dropped sharply in price.
If the companies were well-funded, and had long histories of riding the economic rapids, I expected they would make whatever changes were necessary to recover and go onto new highs. And that’s what almost always happened.
Ford is a classic example of a company that found itself with aging products that its customers no longer wanted. Rather than work on the problem piecemeal, Ford decided to start over almost from scratch.
Ford’s first decision was to stop producing the passenger cars that few people wanted. Only two such vehicles were still selling well: the iconic Mustang and the Bronco. Even those cars were revamped for modern needs.
At the same time, Ford decided to place its future on the success of its popular — and very profitable — pickup trucks. Particular emphasis was placed on the F-150 and the F-250 — the most popular trucks in the world. As with the Mustang and the Bronco, Ford’s pickup trucks were reengineered to better serve the needs of today’s drivers.
Ford also decided to phase out fossil fuel engines for most of its vehicles and make them all-electric. The company’s first electric vehicle was the Mustang Mach-E that was introduced last year. The car is receiving good reviews and is selling well. In fact, there is a backlog of Mustang orders waiting to be filled.
The company’s popular F-150 pickup truck is also being converted to all electric drive. The F-150 “Lightening” is ready for mass production and should be available to customers in March 2022.
So far, over 100,000 orders have been placed for the Lightening — many from fleets that are under a great deal of pressure to reduce their carbon emissions.
Longer term, Ford plans to spend $8 billion to make all its products electric powered. Ford’s target is 40% of its fleet by 2030. Much of the money will be spent developing batteries that will give its vehicles greater range. I think Ford will continue to deliver good profits to investors for several years.