2015 Could Be Ford's Best Year Ever

William Patalon III

I've always been a "car guy."

Back in my high-school, college, and twentysomething years, the term was "motorhead."

I liked to soup up cars, did a bit of drag racing, and restored several antiques and classics with my Dad.

So I know cars.

And as I told Private Briefing readers in a column a few weeks back, I also know Ford.

I've been following the brand, and Ford Motor Co. (NYSE: F) itself, since my teen years. And I really stepped up my focus on the company – as an investment – when I became a journalist in the mid-1980s.

Late last month, I predicted that Ford would be one of the best stocks for 2015.

And a report that I came across yesterday bolstered my belief in my forecast.

Let's take a look…

It's Like the Financial Crisis Never Happened

U.S. sales of new cars and trucks will rise 2.6% to reach 17 million units in the New Year – the best showing since 2005, according to a new forecast by TrueCar, the Web-based auto-sales service. And that follows a year (2014) in which combined U.S. sales of new and used vehicles will rise 8.3% to reach $1.1 trillion – creating a momentum so strong that it will carry into the New Year.

"The overall buying power in the auto market sometimes isn't fully appreciated," TrueCar President John Krafcik said. "To put this in perspective, new vehicle revenue alone will surpass the value of new single family homes in the U.S. nearly three times [in 2014]. It's a remarkable year for the industry as both sides of the market are seeing notable growth and commanding strong pricing power."

Pricing power – a term that investors love to hear.

What it means is that there's so much demand for a product that the company making it can raise prices without scaring folks away. Pricing power provides an "operating leverage" that, in simple terms, means a company like Ford can make more money than it did previously on every vehicle it sells.

Ford has traditionally had some nice pricing power with its hot-selling F-150 pickup truck. But TrueCar forecasters are saying that car companies are going to enjoy even broader pricing power than in years past.

Combine that pricing power with forecasts for higher sales – some industry experts are predicting new car sales could match or exceed previous peaks in the 17 million range – and you're talking about a bullish year for the auto sector.

The "catalysts" are there in the form of a cheap gasoline prices and a surging U.S. economy.

U.S. Growth Will Be Better Than Expected

We all know what's been happening with energy prices. We've talked about the big slide in crude (and the money to be made there) in several recent Private Briefing reports.

And we've also talked to you about the strong economy.

But that's worth drilling into a bit more…

William Patalon III

About the Author

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Before he moved into the investment-research business in 2005, William (Bill) Patalon III spent 22 years as an award-winning financial reporter, columnist, and editor. Today he is the Executive Editor and Senior Research Analyst for Money Morning. With his latest project, Private Briefing, Bill takes you "behind the scenes" of his established investment news website for a closer look at the action. Members get all the expert analysis and exclusive scoops he can't publish... and some of the most valuable picks that turn up in Bill's closed-door sessions with editors and experts.

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