Motley Fool: Ford Motor churning out cars, profits

Ford Motor Co. (NYSE: F) has made vast improvements in the quality and attractiveness of its vehicles since the recession subsided, and now it’s churning out profits quarter after quarter. And no one seems to care.

What’s impressive about Ford today is that it’s profiting from the market’s trends (SUVs and trucks) while also investing in future technologies such as electric vehicles and autonomous driving.

The company recently showed off its second-generation autonomous Ford Fusion, a surprisingly normal-looking vehicle, and it invested $1 billion in Argo AI to develop commercial ride-sharing fleets by 2021. This year, 90 autonomous Ford Fusions – triple the current fleet – will be tested across the U.S. and potentially Europe, refining autonomous technology.

Meanwhile, Ford is profiting from robust demand for trucks and SUVs, as it offers new or recently refreshed products in most of the key segments. Sales of its F-series trucks have been strong, with rising profits, and the refreshed Lincoln line of cars is selling well, too. Other Ford cars are struggling, though, with sales of the Focus, Fusion, Taurus and Mustang recently slowing.

Ford is a leading automaker of the future while still being a cash machine today. That’s a big reason investors should love the stock, which recently sported a dividend yield near 5 percent. (The Motley Fool owns shares of and has recommended Ford.)

Ask the Fool

Q: I plan to use an auto-investment feature to regularly invest in an S&P 500 index fund. Should I wait for a big drop in the stock market before starting? – I.W., Fayetteville, North Carolina

A: No, because the market may not drop for a few years, leaving you on the sidelines. It’s generally a bad idea to try to time the market, because no one can know how it will move in the short term. (Over long periods, it has risen.) If you wait out a market decline, you may miss much of the recovery.

If you’re nervous about where the market is headed, making regular investments over time can be effective. (Do so with equal sums, and you’re “dollar-cost averaging.”) That way you’ll get shares both when they’re lower priced and when they’re higher priced, and you won’t have to keep guessing about the market’s direction.

Don’t fret too much about occasional losses – what matters is that you choose good investments and that you’re focused on long-term performance. For most people, inexpensive broad-market index funds such as those that track the S&P 500 are smart choices.

Q: What’s a “full position” in a stock? – S.F., Mansfield, Ohio

A: It’s the size of the investment you aim to have in it. Imagine that you want to invest $4,000 in MacDonald Farms Inc. (ticker: EIEIO). If you don’t have enough money right now, or if you think there’s a reasonable chance the stock will fall soon, you might buy just $2,000 worth now, planning to add $2,000 later. The $2,000 would represent a half position in the stock. Once you owned the $4,000 worth you wanted, you’d have a full position. A full position varies by person.

My dumbest investment

By far the dumbest investment I made was in a so-called penny stock called TagLikeMe Corp. It has been worth less than a penny per share for a long time now. I wish I had researched it first. I went in blind just because of advertisements. Lesson learned: Research before you buy! – G.M., online

The Fool responds: That’s an excellent lesson. You might add “Stay away from penny stocks” to your lessons learned, too. Penny stocks, typically trading for less than $5 per share, are generally tied to small companies with more story and promise than performance and profits. They’re often hyped online or in newsletters, so that naive investors buy shares, sending the price up so that the hypesters can sell and profit in a “pump-and-dump” scheme.

Google TagLikeMe, and you won’t easily find its corporate website with links to press releases, financial reports and other useful information that could help you assess the company. You won’t find a track record of increasing revenue and earnings, either.

It’s often tempting to buy into penny stocks, as you can get thousands of shares for relatively few dollars. But they’re more likely to sink than soar. It can be hard to imagine that a stock trading for, say, $0.25 per share could fall even further, but it very well might. Your portfolio will thank you if you stick to proven, established companies – ideally ones with profits.