Latest news with #economicmoat
Globe and Mail
01-06-2025
- Automotive
- Globe and Mail
Should You Buy Ford While It's Below $11?
It might come as a surprise to investors, but Ford (NYSE: F) is outperforming the broader market this year. As of May 28, the stock is up nearly 3% in 2025. This small win doesn't take away from the fact that the company has a poor track record over an extended period of time. Nonetheless, it's best to view the situation with a fresh perspective. Ford shares currently trade below $11. Does this setup mean that you should be a buyer right now? Let's look at the most important factors about the business and the stock that long-term investors should be paying attention to. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue » Economic moat In my view, one of the first things investors should try to identify when looking at a potential stock to buy is the presence of an economic moat. Capitalism creates fierce competition. And the companies that have built up durable competitive strengths are able to outperform rivals in the long run. Even the legendary investor Warren Buffett would likely agree. Turning the attention back to Ford, it's an easy argument to make by saying the company does not have an economic moat. A quantitative representation can be had by looking at the return on invested capital (ROIC) of 8.6%. It's best to own businesses that generate a figure well over 20%, as this indicates a huge spread between ROIC and the weighted average cost of capital. Producing a much higher ROIC showcases the ability to create real economic value, as opposed to destroying it. Understanding the industry backdrop will also give investors pause. The market is incredibly competitive, with domestic and foreign auto makers vying for consumer wallet share. The rise of electric vehicle (EV) enterprises only complicates the landscape. Some consumers might have an affinity to a brand, but other factors like price, features, and reliability can matter more in certain circumstances. It's hard to gain any sustainable advantage over rivals. Show me the growth Ford has been around for over a century, a nod to its staying power. However, this also reveals just how mature the auto industry is. Yes, there has been some innovation in recent decades with the introduction of hybrid cars and EVs. But the overall industry's growth isn't anything to write home about. In 2024, Ford brought in $185 billion in total revenue. This is just 28% higher than exactly one decade earlier in 2014. There were 17.8 million cars sold in the U.S. in April on a seasonally adjusted annual rate. That number is the same as exactly 25 years ago. The takeaway is that investors shouldn't expect Ford to miraculously start to supercharge its unit growth in the years ahead, unless, of course, there is a surge in the global population that warrants the need for more vehicles being on the road. I wouldn't bet on it. There is one bright spot under Food's hood, though, which is the Pro segment. This commercial-focused operation put up 15% sales growth in 2024, with an operating margin of 13.5%. Management touts its ability to bring in recurring revenue for the business. Ford stock is cheap At under $11 per share, investors might be drawn to the current valuation. The stock trades at a price-to-earnings (P/E) ratio of 8.1, which is a massive discount to the overall market. Consequently, investors can get a dividend yield of 5.9%. As enticing as that sounds, Ford typically won't command a multiple that's in line with the market just because of how capital-intensive and cyclical the company's operations are. And that dividend payout could take a hit in an economic downturn if revenue and earnings plummet. Ford is a stock that long-term investors should avoid. Should you invest $1,000 in Ford Motor Company right now? Before you buy stock in Ford Motor Company, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Ford Motor Company wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $651,049!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $828,224!* Now, it's worth noting Stock Advisor 's total average return is979% — a market-crushing outperformance compared to171%for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of May 19, 2025
Yahoo
31-05-2025
- Business
- Yahoo
Tractor Supply Company (TSCO): A Bull Case Theory
We came across a bullish thesis on Tractor Supply Company (TSCO) on Flyover Stocks' Substack. In this article, we will summarize the bulls' thesis on TSCO. Tractor Supply Company (TSCO)'s share was trading at $49.70 as of 23rd May. TSCO's trailing and forward P/E were 24.73 and 23.70 respectively according to Yahoo Finance. Dusan Petkovic/ Tractor Supply Company (TSCO) stands out as a rare retail business with a strong economic moat, evidenced by an unusual FTC antitrust investigation into its 2021 acquisition of Orscheln Farm and Home. Unlike most retail sectors, where competition quickly erodes advantages, the FTC recognized TSC's unique dominance in the brick-and-mortar farm store niche, highlighting that online alternatives cannot replicate the hands-on, knowledgeable shopping experience critical to its rural customers. The physical nature of many farm products—large, heavy, and impractical to ship—further cements TSC's position. This moat has proven resilient against big-box competitors like Walmart and Home Depot, who have failed to capture this specialized market. Founded and headquartered in Brentwood, Tennessee, TSC targets a distinct demographic of hobby farmers—individuals managing acreage and animals for personal rather than commercial use—focusing heavily on animal products, a segment not easily duplicated by others. The company's story includes a key personal lesson for investors: spotting undervalued quality early is crucial, as seen when TSC's stock was trading at 10x earnings in 2009, only to soar by 3,750% over the next 16 years. TSC's strategic positioning in rural and exurban areas, away from typical retail hotspots, coupled with a specialized product offering, creates barriers to entry for competitors and drives steady growth. Trading at a reasonable 23.3x next-year earnings with a 1.8% dividend yield, Tractor Supply exemplifies how a niche-focused, well-managed Flyover Stock can deliver outsized long-term returns while maintaining a durable competitive advantage in an otherwise challenging retail environment. Tractor Supply Company (TSCO) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 40 hedge fund portfolios held TSCO at the end of the fourth quarter which was 29 in the previous quarter. While we acknowledge the risk and potential of TSCO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than TSCO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock. READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock. Disclosure: None. This article was originally published at Insider Monkey.
Yahoo
30-05-2025
- Business
- Yahoo
Tractor Supply Company (TSCO): A Bull Case Theory
We came across a bullish thesis on Tractor Supply Company (TSCO) on Flyover Stocks' Substack. In this article, we will summarize the bulls' thesis on TSCO. Tractor Supply Company (TSCO)'s share was trading at $49.70 as of 23rd May. TSCO's trailing and forward P/E were 24.73 and 23.70 respectively according to Yahoo Finance. Dusan Petkovic/ Tractor Supply Company (TSCO) stands out as a rare retail business with a strong economic moat, evidenced by an unusual FTC antitrust investigation into its 2021 acquisition of Orscheln Farm and Home. Unlike most retail sectors, where competition quickly erodes advantages, the FTC recognized TSC's unique dominance in the brick-and-mortar farm store niche, highlighting that online alternatives cannot replicate the hands-on, knowledgeable shopping experience critical to its rural customers. The physical nature of many farm products—large, heavy, and impractical to ship—further cements TSC's position. This moat has proven resilient against big-box competitors like Walmart and Home Depot, who have failed to capture this specialized market. Founded and headquartered in Brentwood, Tennessee, TSC targets a distinct demographic of hobby farmers—individuals managing acreage and animals for personal rather than commercial use—focusing heavily on animal products, a segment not easily duplicated by others. The company's story includes a key personal lesson for investors: spotting undervalued quality early is crucial, as seen when TSC's stock was trading at 10x earnings in 2009, only to soar by 3,750% over the next 16 years. TSC's strategic positioning in rural and exurban areas, away from typical retail hotspots, coupled with a specialized product offering, creates barriers to entry for competitors and drives steady growth. Trading at a reasonable 23.3x next-year earnings with a 1.8% dividend yield, Tractor Supply exemplifies how a niche-focused, well-managed Flyover Stock can deliver outsized long-term returns while maintaining a durable competitive advantage in an otherwise challenging retail environment. Tractor Supply Company (TSCO) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 40 hedge fund portfolios held TSCO at the end of the fourth quarter which was 29 in the previous quarter. While we acknowledge the risk and potential of TSCO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than TSCO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock. READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock. Disclosure: None. This article was originally published at Insider Monkey.
