By all accounts, shares of Ford Motor Company (F) should be up today… big-time. Vehicle sales were up 8% last month, as measured by the total number of units sold, and sales grew 9% during the first quarter of 2016. It was the best Q1 for Ford SUVs ever, following what was a record pre-tax profit for the company in 2015. There’s not much to not like.

Yet, there it is. Ford stock is down 3% today, not because last month’s and last quarter’s sales figures weren’t great, but because they weren’t great enough. Analysts were calling for March sales growth of 9.4%, rather than the 8% the company mustered.

[ad#Google Adsense 336×280-IA]Not that one day’s action from Ford stock makes a trend, but it does raise a key philosophical question: How does one invest in absolute results in a market that tends to price stocks based on relative results?

A Game of Psychological Chess
Investors who are baffled by the mixed message need not blame themselves.

The media, along with the analysts they tout to support their theses, is the culprit.

The two juxtaposed headlines below (a screenshot of Ford’s home page at Yahoo! Finance) illustrate just how conflicted the perceptions are at this point.

It wouldn’t be fair to say “auto sales aren’t looking great” and “auto sales headed toward best month in 10 years” are diametrical opposites, but they are near the polar ends of the continuum. The headlines were also in reference to all auto manufacturers’ sales, collectively although Ford wasn’t immune to the glass-half-full/half-empty rhetoric.

What gives?

As much as we’d like to believe the opposite, financial journalism isn’t an exact science. It doesn’t even really lead decision-making anymore. Rather, too much financial journalism merely reflects the market’s and analysts’ interpretation of data, even when that interpretation is conflicted and fuzzy … as it is for Ford at this time.

In simplest terms, the media (and to a lesser degree, analysts) would love to see Ford and its peers hit a wall soon because that’s the big rumor making the rounds among investors right now. It makes for much more interesting headlines. And, it’s fun to be right about things that really matter.

In a similar vein, few want to admit it, but an expectation of 9.2% unit-sales growth in March for Ford was a setup for failure. A growth rate of 8% is solid, even if not sizzling. This relative shortcoming makes Ford stock a much more interesting and volatile trading instrument.

Conspiracy? No. It’s not even a conscious decision for most journalists and analysts. It’s just that the only thing more boring than mediocre expectations is a company merely meeting mediocre expectations. It’s tough to sell mediocrity to investors, though most of the time that’s how companies perform.

The good news is, the sentiment pendulum always eventually swings the other way again. It’s just a matter of figuring out when that counterstroke will start.

Bottom Line for Ford Stock
As cliché as it is to invoke … well, clichés to make a point, this is a case where it can and should be done. So…

In the words of legendary investor Benjamin Graham, “In the short run, the market is a voting machine but in the long run, it is a weighing machine.”

Ford is a great company, and Ford stock is a great long-term investment. It’s on a growth streak, and when looking past all the noise, more of the same is expected for the foreseeable future.

Right now, however, Ford stock been hijacked by the trading crowd more interested in relative results than absolute results.

A great number of the people in the short-term crowd are also part of the crowd that assumes the cyclical peak in auto sales has already been reached, and that Ford can only suffer from here.

Big mistake. Even if we have reached maximum capacity on domestic or even global auto sales, there’s no actual empirical evidence that Ford Motor — or the industry as a whole — can’t dole out repeat sales performances in 2016 and beyond.

It’s also generally dangerous to assume a recession is around the corner. They usually don’t materialize when expected.

Whatever the case, until there’s clear evidence things won’t, or can’t, get any better, Ford stock is not only a “buy” but an outright bargain with its forward-looking P/E of 6.5.

Just be prepared to hold onto it for a while.

— James Brumley

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Source: Investor Place