Many investors have underperformed the market this year. The good news is that there’s always another year to look forward to. Here’s a list of solid franchise names that have been badly beaten by the market this year. The list has the potential to become big winners next year as the market recovers.
Ford Motor Corp. (F) is a badly beaten stock having lost 33% for the year. The decline is in line with other automakers price performance. Year to date, both General Motors Corp. (GM) and Toyota Motors (TM) are also down by 34% and 17% respectively. There is a general bearishness in this sector as there are still doubts whether US consumer spending has picked up. Investors have focused on the US markets as bulk of revenues comes from the territories. In this case, the market may have missed the strong financial performance of Ford.
The stock is currently trading at 6.75 times earnings. This valuation is higher than General Motor’s 5.58 times earnings but lower than Toyota’s 14.29 times. It seems that investors have not yet fully appreciated the turnaround of the company. It has outperformed its competitors in terms of market share. This is attributed to improvement in vehicle supply and better vehicle prices.
This will ultimately brings better cash flows and margins for the company. At present, net profit margins is at 6.76% compared to its competitors’ margins of 3% to 5%. It is reducing its debt and most likely would declare dividends in the future. Ratings agencies seem to agree. To continue reading, click here