Why Tesla and Elon Musk are still better investments than Ford

Brian Sozzi

Two wildly opposing weeks for two of the biggest names in autos. But only one stock reigns supreme, says one top strategist.

“Early mover advantage is real, whether you are talking about nation building or building autonomous vehicles. And Ford has struggled,” said Hercules Investment CEO James McDonald on Yahoo Finance’s The First Trade. “I don’t like Ford. I don’t like manufacturing. I don’t like the auto sector. But I do love autonomous vehicles, AI and so Tesla will be the winner there.” Tesla shares are in one of McDonald’s portfolios.

The market loves Tesla, too.

It has been an insane week for the Elon Musk led Tesla. The electric vehicle maker saw its shares surge close to $1,000 earlier in the week amid a massive short covering rally following a much better than expected fourth quarter. The stock has since cooled to around $750 a share as of Friday afternoon. But even still, it’s up an insane 75% year-to-date as investors bet on Tesla continuing to pioneer the electric and autonomous vehicle markets.

Tesla CEO Elon Musk introduces the Cybertruck at Tesla's design studio Thursday, Nov. 21, 2019, in Hawthorne, Calif. Musk is taking on the workhorse heavy pickup truck market with his latest electric vehicle. (AP Photo/Ringo H.W. Chiu)

On the other hand, good ole’ Ford has had a week its top execs would probably like to forget.

Ford appointed Jim Farley as its new COO today, replacing long-time exec Joe Hinrichs. The C-suite shuffle comes days after a very disappointing fourth quarter earnings report and profit outlook.

Admitted execution issues in the U.S. tied to the new Explorer SUV and challenging conditions for automakers globally weighed on Ford to close out 2019. The company’s sales fell 5% from the prior year, adjusted operating profit margins dropped 230 basis points and free cash flow decreased to $500 million from $1.5 billion. Sales dropped in all geographic regions.

Ford’s stock is down about 9% over the past five sessions. Shares are lower by 13% on the year, despite the automaker making a strong pivot into electric vehicles with as $500 million investment in Tesla rival Rivian (among other actions).

“It doesn’t matter how much you spend, you have to have the most popular product to win. And Ford has struggled. They have the intelligence, but the products just aren’t competitive,” said McDonald.

Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Watch The First Trade each day here at 9:00 a.m. ET or on Verizon FIOS channel 604. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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