1 Stock Making Money the Right Way
Consumers are becoming more and more socially conscious and want the goods and services they use to measure up. In truth, it doesn't take much. A simple action that costs a company very little or nothing at all can make a real difference in the mind of the consumer.
Often, the added expenses a company incurs from paying workers a little more, monitoring resource sourcing, or going the extra ethical mile are small downsides when compared to the huge potential upside. And where there's company upside, there's investor upside.
Ford Motor Co. (NYS: F) has made some significant strides in this area. Let's dive deep into the classic American automobile manufacturer, evaluate the company's socially conscious policies and practices, and take a hard look at the numbers. We'll analyze Ford in terms of its performance as a business, an investment, and as a socially responsible enterprise.
Traffic jams as a global concern
Let's start, literally, with yesterday's news. Bill Ford, Ford's current chairman of the board and great-grandson of the famous Henry, made a major speech Monday on the subject of global traffic jams.
Specifically, he addressed how gridlock in countries around the world is bad for both communities and for car manufacturers, and how manufacturers need to band together with governments and academia to rethink urban planning in an increasingly urbanized world. In an interview, Ford told Financial Times: "The whole goal is seamless, clean mobility in a crowded world."
Thankfully, it's not your father's Ford
When Bill Ford was CEO, he was known for his commitment to the environment, including the complete transformation of an old Ford manufacturing plant into a clean and totally "green" facility. The company also has a strong lineup of fuel efficient cars, including two non-hybrid compacts that get 40 MPG as well as a sedan, SUV, and van hybrid.
On the company's website, there's a fully realized and jam-packed "sustainability" section, offering a comprehensive summary of the company's goals in such areas such as reducing water usage at its plants, reducing tailpipe emissions from its cars, developing a culture of good corporate governance, and monitoring working conditions at its factories.
In the letter that opens up the company's 2010/2011 sustainability report, CEO Alan Mulally summed up Ford's social consciousness nicely: "By delivering cars that are greener, safer, and smarter, we enhanced our competitiveness and built stronger relationships with our customers." Now, to Ford's numbers.
In the wake of the 2008 financial crisis, Chrysler was purchased by an Italian company, Fiat, and if not for a federal bailout, the American auto industry would have lost General Motors (NYS: GM) . Ford survived, all on its own, a fact the company wears like a war medal.
Each year since the crash, the company has grown financially fitter, and 2011 in particular was a very strong year for the company:
- Quarterly revenue grew a solid 6.6% YOY, handily beating GM's 3% and even Toyota's (NYS: TM) 4.1%.
- Gross margin, a measure of brand strength and pricing power, is a strong 14.5% TTM, beating both GM and Toyota at 12.7% and 13.8%, respectively.
Ford's balance sheet holds $22.87 billion in cash and $99.49 billion in total debt -- not ideal. Because Ford didn't declare bankruptcy, like GM and Chrysler, it wasn't able to clear pension debt off its books. Ford also had to borrow a lot of money to survive. The good news is, money is cheap right now, and Ford has been steadily paying its debt down.
The current share price is around $12.30, with an absurdly low P/E of 2.49, this because of a one-time tax credit of $12.4 billion the company received in 2011 artificially driving the valuation down. Regardless, the bottom line is Ford is looking strong right now, so with a price and valuation like this, perhaps investors shouldn't dither too long.
Making money and making a difference
Companies like Ford that understand the connection between profit and social responsibility are companies that are in touch with the times and are some of this planet's most successful. Apple (NAS: AAPL) has famously gotten the connection of late, joining the Fair Labor Association in January and giving shareholders majority vote for directors. Nike (NYS: NKE) has been a member of the Fair Labor Association for years now, as the clothing and footwear industry have been in the fair labor movement's sights far longer than high-tech has, and is thriving.
Are any companies perfect in this regard? No, but, to paraphrase Voltaire, it's important to never let the quest for the perfect drive out the good. If you're looking for similarly forward-thinking, profitable investments like Ford, Apple, and Nike, read about the stock The Motley Fool is calling its top stock pick for 2012 in our special free report, aptly titled "The Motley Fool's Top Stock for 2012." Get it while the stock is still hot by clicking here now.
At the time this article was published Fool contributorJohn Grgurichquotes Voltaire whenever he gets the chance, though his German Shepherd prefers Nietzsche. Neither owns shares of any of the companies mentioned in this column. Follow John's dispatches from the bloody front lines of capitalism onTwitter@TMFGrgurich. Be forewarned, the Motley Fool owns shares of Ford Motor and Apple. Motley Fool newsletter services have recommended buying shares of Apple, Nike, Ford Motor, and General Motors. Motley Fool newsletter services have recommended creating a diagonal call position in Nike. Motley Fool newsletter services have recommended creating a synthetic long position in Ford Motor. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has a positively scintillatingdisclosure policy.
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