November 18, 2012 in Business

Forward-thinking Ford offers no-brainer of investment

Universal Uclick
 
Associated Press photo

A prospective buyer looks over Ford F-150s at the Formula Ford dealership in Montpelier, Vt., in 2010.
(Full-size photo)

Ford’s (NYSE: F) recently reported third-quarter earnings offered much to smile about.

For starters, Ford earned about $800 million more in “pricing” – the ability to get better asking prices for its products – than it did a year ago. That’s huge. Ford’s much-improved vehicles have greatly increased its competitive position and its ability to sell without big discounts – all over the world, even in recession-crushed Europe.

But the big story has been here in North America. Excluding taxes and special items, Ford’s North American earnings surged 48 percent. Ford’s U.S. sales have been mediocre in terms of absolute numbers, lagging key competitors. But its ability to ask and get premium prices for its products – perhaps assisted by short supplies of some hot models – made for a strong increase in profits anyway.

Ford has made huge investments in its car lines in recent years, and those have paid off: Models like the Focus are big sellers all over the world, thanks to high perceived quality, advanced features and much-improved fuel efficiency. But for all of Detroit’s Big Three, pickup trucks are the high-volume, high-profile, high-margin products that drive just about everything else.

While Ford still has substantial work to do overseas, it’s generating growing profits at home. (The Motley Fool owns shares of Ford and its newsletters have recommended Ford and GM stock.)

Ask the Fool

Q: Is life insurance really something everyone needs? – T.N., Flagstaff, Ariz.

A: Nope. Those with no children, no house and no debt might consider skipping it – for now.

Think of insurance as protection against a financial loss, not as an investment. (There are, after all, more effective ways to invest.) If a partner or children are depending on your income, then buying life insurance makes sense. But if you don’t need to protect any income stream, consider parking your money elsewhere.

Learn more about insurance before buying any, though. Perhaps visit iii.org, lifehappens.org and fool.com/insurance.

My dumbest investment

I was just starting to invest on my own when I got a piece in the mail about a new shoe stock and fell in feet first clear up to my neck. I would have done all right, had I not gone on vacation with no way to follow my positions or trade. While I was away, the stock went from just over $2 per share down to $0.25, never to recover again. I’ve learned to always be aware of my positions and to make sure I can buy or sell instantly. I still lose some here and there, as everyone does, but that’s part of investing. – D.E., Lanesville, Ind.

The Fool responds: It is indeed smart to keep on top of your holdings, and common to lose money now and then, but you were dealing with a penny stock. They’re often extra-risky and are usually best avoided. Stick to established companies with successful track records of growth and profits, and they probably won’t drop by 88 percent with little notice. Successful investors should be able to go on vacation and tune out for a while!


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