Tuesday, April 26, 2011

Betting On People Over Rocks

... and grains and fluids and other commodities.

Ford did well this last quarter.
DETROIT—Ford Motor Co. reported its largest first-quarter profit in 13 years on a recovery in the global economy, a larger portfolio of fuel-efficient vehicles and consumers buying a mix of pickup trucks and cars ...

In fact, Ford boosted its second quarter global production forecast saying it now expects to build 1.5 million new cars and trucks, up by about 12,000 vehicles from the year earlier period.

"We expect our annual volumes to continue to grow substantially, driven primarily by our growing product strength, a gradually strengthening global economy and an unrelenting focus on improving the competitiveness of all of our operations," Chief Executive Alan Mulally said in a statement.
Sitting with friends around the dinner table at Easter, there was a general agreement that Ford was making good cars. Several of us had rented Ford Focuses (Foci?) in the past year and had loved them. Yahoo had a front-page story recently giving the ten worst cars of the year and the only American car company without one on the list was Ford. Ford seems to be doing well by doing things right.

When you invest in commodities, you're investing in objects. Gold is a rock, oil a fluid and wheat a grain. There's been a big run up in commodity prices in the past year as the effects of Ben Bernanke's crazy printing press at the Fed has led to commodity inflation. There was (and is?) money to be made investing in objects.

When you choose forgo commodities to buy stock in a company like Ford, you're betting on human beings over objects. You're gambling that the folks at Ford can take those commodities and make something of even greater value out of them. Everyone knows what's happened with gold and oil lately. The things are going crazy and hitting new highs all the time. How can human beings like those at Ford compete with that?

Pretty well, actually.

Over the past 2 years, commodity funds based on oil (OIL) and gold (GLD) have risen 50%. That's a terrific rate of return. Ford has risen 200%.

Human ingenuity and human resilience is the component most overlooked by the doomsayers. Just like the folks in Portugal who are putting two and two together and figuring out that borrowing vast sums of money to fund their social safety net was not "compassionate" after all, the people at Ford have taken a moribund American auto giant and made something dynamic out of it.

Personally, I'll bet on people over rocks every day of the week.


tim eisele said...

I may be a bit biased in favor of Ford (we always had Ford vehicles when I was a kid, because the dealer was one of my dad's high-school buddies; and my father-in-law used to work for them), but I have always liked their vehicles. They are reasonably reliable, and keep working even when they get old.

For example, I just realized recently that my 1994 Ford Ranger pickup is old enough to get its own driver's license, and it still starts up immediately even in the coldest weather. It has accumulated an impressive array of dings and scratches (and the tailgate is a different color because somebody backed into and destroyed the original one), but it is holding together. I'm hoping to keep it at least until it's old enough to drink legally. And maybe until it gets enough mileage on it to have driven to the moon.

Jeff Burton said...

So, you have a lot of F in your portfolio?

K T Cat said...

Jeff, I don't have the $$ to invest in individual stocks. I've got retirement accounts, but no gambling investment ones. I did in the past and managed to do tolerably well, but right now I'm using my $$ to pay down mortgages.

May said...

The guy is definitely right, and there's no question.