Between Ford (F) and General Motors (GM), GM stock is the better holding. Ford stock has better value. Why is F stock a better buy?
In 2024, F stock gained 16.77%, thanks to a 9.27% rally last week. Unfortunately for Ford investors, GM stock as of last week is up by 36.44% and is outpacing Ford stock. If GM’s rally ends, Ford has a good chance of catching up. The valuation gap is one of many catalysts.
Ford needs a meaningful business catalyst to lift the stock higher. Other factors that may lift F stock include a special dividend, a sharp cut in electric vehicle spending, and product quality improvements.
For the last two decades, poor quality led to warranty claims and recalls. This increased Ford’s expenses, justifying the stock’s discount. This year, EV demand is weakening as consumer renew their interest in hybrid and gas-powered vehicles.
Risks
Ford promised for decades to reduce its expenses. However, quality problems persisted, even for its newer lineup of EVs. Until the firm revamps its culture to prioritize quality and reliability, customers will not trust Ford’s brand. This will keep Ford’s discount to GM at current levels until things change.
