Ford Motor has been around for many years. Investors reward the company with a market capitalization higher than General Motors.,
its main rival. It is easy to understand how this happened – why is it difficult for God.
Ford (ticker: F) closed Tuesday with a market capitalization of $82.962 billion, according to FactSet. GM closed with a market capitalization of $82.916 billion.
With a difference this small, according to factset is a required modifier. With a margin of less than 0.1%, the exact share counts. And the number of shares is constantly changing based on management stock option exercise and other factors.
Account for all of that, and Ford has ousted GM. According to Dow Jones market data, this is the first time since 2016 that Ford’s market capitalization has exceeded that of GM.
It’s easy to find out how. Ford’s stock is up about 136 percent to date. GM shares are up about 37% so far in 2021. Both returns of 28% and 20% are comparable, exceeding the respective gains of the S&P 500 and the Dow Jones Industrial Average.,
GM stock has done well, but Ford stock has outperformed its peers.
It is difficult to guess why this happened. Starting points mattered. He is a factor. Ford is, inevitably, in a turnaround under the leadership of new CEO Jim Farley. At the end of 2020, ushering in the new year, Ford shares had lost about 30% of their value over the past three years. GM stock was up about 2% in the same period.
So Ford was playing catch-up. It doesn’t explain everything though. Over the past four years, starting with 2021 included, Ford stock has gained about 66% overall. GM shares are up about 39 percent. Ford has gone ahead.
The company seems to be getting more credit for its vehicle electrification plans. Ford has announced plans to develop its all-electric F-150 and spend billions on new capacity for battery and electric-vehicle assembly capability, launching its all-electric Mustang Mach E this year.
However, GM has done exactly that, announcing to spend billions on batteries, battery materials and EV assembly capacity. GM is also selling an all-electric Hummer truck now and plans to unveil an all-electric Chevy Silverado in the coming weeks. (Don’t forget, GM sells more EVs than Ford worldwide, including in Chinese joint ventures).
The strategies feel the same, but the market is a little uneasy about GM. Some factors may be at work. Chevy Bolt EV was recalled due to battery failure. However that defect was traced to a supplier. GM’s autonomous driving company Cruze has also had some problems recently. CEO Dan Ammann left abruptly, possibly due to differences between Amman and GM CEO Mary Barra in the strategic direction Cruise should take.
The market may be right to say that Ford had a better year, but under the right circumstances, underperformance can be an opportunity. If GM gets the Bolt and other EVs shipping, the Silverado launch right and makes progress on its autonomous driving features then the stock should work out just fine.
Ford’s stock is trading at around 10.4 times expected 2022 earnings. GM stock is trading at close to 8.2 times that number. If GM were to trade for 10.4 times earnings it would be a $72 stock and by the end of 2017, its total return would be about 75%, which is very close to Ford’s total return.
Write to Al Root at [email protected]