Ford got a lot of publicity recently because of the fact that Tesla had surpassed its valuation despite selling just a tiny fraction of the number of vehicles that Ford sells. This article says that the PR has reminded that Ford could be a major buying opportunity, as the company looks cheap. The stock currently trades at just 7x 2018 projected earnings and yields a whopping 5.4%. The dividend also looks stable is it is under 40%. The company has the fifth lowest P/E ratio in the S&P 500; GM is the lowest. Concerns for Ford are centered around its exposure to the subprime auto loans as well as the strength of the US auto market, its core operation. Ford insists the credit business is strong.
FINSUM: The low valuation and strong dividend make Ford attractive, while the credit exposure is a bit worrying. More research would need to be done, but it could prove a strong buy.
Walmart may have just taken a big step forward in the fight against Amazon. The firm announced that it will offer discounts on over 1 million items that consumers buy online and then pickup in store. The plan comes from Walmart’s acquisition of Jet.com which pioneered similar new options, like getting a better price if you forgo the option to return the product. Walmart’s head of ecommerce said of the change that “Quite simply, it costs less for us to ship to stores. So, our customers should share in those savings”. Walmart has a 4,700 network to use for the plan.
FINSUM: This is a smart play by Walmart as it is using what it has, but Amazon doesn’t—physical stores—to its advantage. The question will be whether the discounts will be enough to entice people to go to stores.
This article contends that there has been a lot of confusion over what a new version of Glass-Steagall would really mean. The main source of confusion seems to surround the idea of why Gary Cohn, longtime Goldman Sachs man, would support legislation that would cause such massive upheaval in banking. The answer is simple: such a rule change would be a big competitive advantage for smaller banks like Goldman Sachs and Morgan Stanley, who are still not conventional deposit-taking institutions. If massive rivals like JP Morgan, Citi, and Bank of America could no longer use their enormous balance sheets to their advantage in investment banking, it would be a big competitive boon to the likes of Goldman Sachs.
FINSUM: This helps explain Cohn’s previously quizzical perspective on this issue, even if it is quite obvious. However, it is sill surprising that in his new role he would desire such a big change to the US financial system.
Source: Financial Times
If there was ever a sign of the changing times in the auto industry, as well as the dangers of over-valuation, this is it. Yesterday Tesla’s value surpassed that of 100-year Ford, with the company now worth $48.7 bn versus Ford’s $45.3 bn. This comes despite the fact that Tesla delivered just 76,000 cars last year against Ford’s 6.6m. The change in valuation follows concerns over Ford’s conventional car business and growing hopes over Tesla’s electric and self-driving divisions.
FINSUM: Just as with other major stocks, it is amazing the degree of value a company can command despite not making any profit, especially in Tesla’s case where everything is so speculative.
Source: Financial Times
Walmart has been trying to compete with Amazon for a while now, and mostly to no avail. The company tried a program similar to a Prime membership, but it did not work with flying colors. Now it is trying a new strategy by buying up a handful of small, hip online retailers and letting them run as their own sites. The buying binge started with Jet.com six months ago, and now Walmart has bought ModCloth and Moosejaw, two well-known boutique online retailers. Many customers say they resent a giant company like Walmart buying these boutique brands as Walmart’s values are out of line with companies’ image. Walmart plans to let the sites continue to operate as their own entities.
FINSUM: Hard to see exactly how this will pan out. Walmart says the acquisitions were partly inspired by the fact that many brands didn’t want to sell through Walmart, so they needed these companies just to get merchandise. The broader strategy still seems unclear.
Source: Wall Street Journal
Nike has been in the financial news a lot lately, both in pieces which call it an opportunity, and others that say it is on its way down as it is being outcompeted by rivals like Adidas and Under Armor. The stock had rallied some to start the year, but yesterday dropped over 7% on new earnings. The company is in a transition period as it is moving from a mostly wholesale model to one where it markets more of its own products directly to consumers. That said, it is still very reliant on wholesale, and yesterday it reported that its orders in that area for the next six months are down 4%, the first time that stat has been negative in 7 years.
FINSUM: Never count out Nike. We think this could be a good strategic buying opportunity as the company shifts its strategy.
Source: Wall Street Journal