The broader stock market averages were mixed last week, as volatility pushed higher. When the dust settled on Friday, the Nasdaq Composite had its first gain in five weeks, while the other major indexes ended fractionally lower.
Energy and Industrials were the worst performers last week, while Real Estate stocks rallied. The cryptocurrency market experienced a wild ride, as the digital assets were the subject of increased government scrutiny in China.
Economic data was mixed last week. On one hand, existing home sales and housing starts missed expectations. On the other hand, leading economic indicators and the preliminary May PMI readings painted a rosy picture for the U.S. economy.
The retail sector dominated a relatively quiet earnings calendar. Target (TGT) and Wal-Mart (WMT) posted solid quarterly results.
The Week Ahead
Looking ahead to next week, new homes sales and consumer confidence will kick off the economic reports on Tuesday. We’ll receive the core PCE price index on Friday, which is a key inflation reading.
Thursday will be the big day for earnings reports, with Best Buy (BBY), Costco (COST), Medtronic (MDT) and Salesforce (CRM) all expected to post results.
Following the snap-back recovery in stocks last year from Pandemic lows, we believe that investment gains will be harder to come by in 2021.
As a result, deciding what and when to buy can be challenging for any investor. However, the fact remains that attractive investments are out there if you’re willing to dig a little deeper.
One such Automotive name is worth a closer look and is our Stock of the Week.
Stock of the Week: Ford Motor (F)
The company manufactures cars and trucks around the world under the Ford and Lincoln brands.
The stock gained more than 12% last week. We believe this momentum can continue into the second half of 2021. Here’s why:
Ford’s co-CEO Jim Farley announced on Friday that its new electric F-150 truck received 44,500 orders in less than 48 hours. This is welcome news for the company, as the entire auto industry is seeing production rates hampered by a global semiconductor shortage.
Despite these supply-chain issues, management delivered blowout quarterly results back in April. Ford earned $0.89 a share in the first quarter, as revenue increased 7% from the previous year, to $33.55 billion.
The company said that upside in the period was driven by demand for a new electric Mustang car, in addition to revamped F-150 and Bronco trucks. Management is also keeping a tight lid on costs.
Ford is expected to post 188% earnings growth in 2021, to $1.18 a share. The company also generates about 35% of its sales outside of the U.S. and should benefit from a weaker dollar. The stock is currently valued at just 11.3x expected full-year profit, which is a discount to the broader market.
Wall Street agrees that Ford has value at current levels. Tudor Pickering initiated coverage of the shares on Tuesday, with a Buy rating. Analyst Jeoffery Lambujon set a $17 price target, (27.5% upside potential), citing:
“As evidenced by significant improvements to EBIT margins in Q1’21, the global redesign initiatives that were announced in 2017 have been working. While this year will be negatively impacted by both commodity headwinds and the global semiconductor shortage, we are above consensus on FY’22.”
In addition, earlier this month, hedge fund manager Ray Dalio announced a new $19.6 million position in the company.
It’s also worth noting that Ford carries a Smart Score of 10/10 on TipRanks. This proprietary score utilizes Big Data to rank stocks based on 8 key factors that have historically been a precursor of future outperformance.
On top of the positive aspects mentioned already, the Smart Score indicates that shares have seen insider buying, in addition to improving sentiment from financial bloggers and individual investors.
FYI: This is just 1 of the 20+ stocks selected for the Smart Investor portfolio. That’s where we share more detailed insights on our weekly stock picks.
