March Madness Round 2: ExxonMobil Vs Kinder Morgan
March Madness Round 1: Disney Vs. General Electric
March Madness Round 1: Kinder Morgan Is A Slam Dunk Over Duke Energy
March Madness Round 1: ExxonMobil Vs Chevron
This piece is part of InvestorPlace's 2015 Stock Market March Madness contest. Follow the link and vote for your favorite stocks.
In Round 1 of InvestorPlace's Stock Market March Madness, I predicted that Ford Motor Company (F) would roll over monsanto Company (MON), and Ford fans outvoted Monsanto fans by a three to one margin.
Alas, I was not prescient with respect to the Walt Disney Company (DIS) vs. General Electric Company (GE) contest. While I still consider GE to be the better long-term bet, I was outvoted by a wide margin. Disney took 84% of the vote, utterly crushing GE.
Now, Round 2 pits Ford against Disney, a very uneven match-up. In Ford, we have an old-line manufacturer fighting against ugly demographic trends: As the Baby Boomers age, they are driving less, and the Millennials are less interested in cars than preceding generations. And in Disney, we have an old-line media company with an uncertain future in the era of cord-cutting and paid TV delivered over the internet.
Both companies face their challenges, but in my mind there is no real contest. Ford is cheap and essentially has nowhere to go but up. Disney is quite expensive, and investors seem to be ignoring the risks on the horizon. The clear choice here is Ford.
Ford Motor Company
Auto sales are at roughly 2005 levels, unchanged for ten years after falling to 30-year lows in 2009. Over that same period, real GDP grew by more than 16% and the US population grew by 9%. There is a big gaping black hole where auto sales should be, and one that I expect will be filled soon.
As I mentioned in Round 1, Americans have been putting off car purchases for years due to the bad economy, and the average car on the road is over 11 years old. So yes, even while Baby Boomers drive less and Millennials opt for Uber, you're still looking at a lot of demand for new cars in the years ahead as the existing stock eventually breaks down. While not a “backlog” of orders, per se, it's fairly close.
