Tariff Talk Didn't Gum Up Ford's Engine
This automaker stands out as one name that could keep powering ahead amid Trump's higher import taxes.
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As the president of the United States signed an executive order placing 25% tariffs on imported autos, small trucks and auto parts, the shares of one company stood out amid the red: Ford F.
Nearly every other name got beat down -- even starting hours ahead of the announcement: General Motors GM, Stellantis STLA, Ferrari RACE, Mercedes Benz MBGAF, Nissan NSANY, Rivian Motors RIVN, Toyota Motor TM, Honda Motor HMC. All of those stocks were visited by the "ugly stick" on Wednesday and suffered multiple percentage-point selloffs. Most of them were also down notably as Wednesday night turned into Thursday morning.
Ford was the exception as an American car company that was actually up on Wednesday, at +0.1% and appears to be close to holding its own overnight. The stock, by the way, just recently did, and still nearly does, qualify as a stock that trades under $10. (Not exactly a car company, but Harley Davidson HOG traded higher on Wednesday as well.)
What Gives?
Put bluntly, Dearborn, Michigan-based Ford Motor is less exposed to tariffs on vehicles and parts imported from Canada and Mexico or elsewhere than are its competitors, even its U.S.-based competitors. A rough 18% of Ford's fleet is imported from the nation's North American neighbors, and the automaker assembles a higher percentage of its vehicles on U.S. soil than even General Motors or Stellantis.
Stellantis, which is headquartered in the Netherlands, despite housing U.S. brands such as Chrysler, Dodge and Jeep, manufactures about 39% of its vehicles in either Canada or Mexico, while Detroit-based General Motors manufactures roughly 36% of its vehicles in those two nations. In fact, about two thirds of GM's vehicles contain imported parts.
This does not mean that Ford will get away unscathed, but it does mean that perhaps Ford will be less pressured to increase prices in order to preserve margin than might its competitors. While roughly the same percentage of Fords contain foreign made parts as do cars made by GM, as mentioned above, a far higher percentage of Fords are finished domestically. All car companies selling here in the U.S., will likely face some disruption to their supply chain.
What Do I Think?
I'm not sure that this is a good time to get involved in putting money to work in these industries, but if there is one that might come out on top should these tariffs persist, it looks to be Ford Motor. Ford CEO Jim Farley, cousin to the late comedian Chris Farley, said last month that sustained tariffs would have a "huge impact on our industry with billions of dollars of industry profits wiped out and adverse effect on U.S. jobs, as well as the entire value system in our industry."
Still, while that "ugly stick" has not yet let up on Ford's competitors, there is visible technical support for Ford's stock evident on the daily chart:
Readers will see that Ford Motor formed a double-bottom pattern of bullish reversal in February/March and has hist resistance at the 23.6% Fibonacci retracement level of July through that double-bottom selloff. Readers will also see that Relative Strength is solid and that the stock's daily Moving Average Convergence Divergence indicator is postured in moderately bullish fashion. There was also a double bottom created ahead of that selloff that created an 18.6% move past that neckline.
This neckline stands at $9.81. An 18% move past that spot would land the shares at $11.28. Follow me here. A run that far would take the stock past its 200-day simple moving average. Should that happen and should Ford at that time appear to be traversing the environment better than its competitors, portfolio managers will be funneled into Ford. Using the 200-day simple moving average as the stock's actual pivot could allow for a target price as high as $13.
Not enough for you? In this environment, that's enough for me. Oh, did I mention the $0.75 per share annual dividend that at these prices, yields 7.28%? GM's dividend yields 0.94%. Just some food for thought. I'm likely to buy some Ford Motor after this article is public material.
At the time of publication, Guilfoyle had no position in any security mentioned.
