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What Could a Slower Economy Mean for Ford?

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While the consumer has largely held up amid growing economic fears, what could a slower economy mean for auto sales.

In this sneak peek from the Action Alerts PLUS investing club August live show, co-portfolio manager Chris Versace explored potential impact to the car upgrade cycle.

FULL VIDEO TRANSCRIPT BELOW:

CHRIS VERSACE: So in the past, what we have seen is during recessionary times, consumers tighten their belts. They stretch their spending where they can. And it means that the upgrade cycle for cars is probably getting extended.

Well, a couple of things-- one, we know that over the last few years, the average age of the car on the road has topped over 12 years. So it's near the higher end. We will see some continued spending. What we're going to want to watch, though, is, what are consumer balance sheets looking like?

To the extent that they continue to have firepower-- and so far, the consumer is holding up better than expected. The demand for Ford products could be better than expected as well. So I think what we want to see from Ford is continued consumer reception, just like we saw today with their most recent monthly sales that surprised to the upside.

But we also want to see the company internally continue to see further improvement in their mix shift, not just towards the higher-margin products, SUVs and trucks, but continue to see the steady climb in EV sales. Because that is what's going to lead people to rethink how they value Ford. And that is the crux of our investment thesis when it comes to the shares.

Ford is a holding in the Action Alerts PLUS investing club.

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