by We continue our series where you evaluate your everyday interactions from the point of an investor. As an investor it’s important to be aware of the opportunity that surrounds you. You might be missing out on a future gold mine!
If you missed part 1 of the series you can check it out and determine if the watch you wear or the cell phone service you use are opportunities for your investing dollars.
Today we are going to evaluate an automaker and an insurance company. If you drive a car then you have insurance. In theory every driver could also be an investor in the very company that they drive daily.
Is Your Car Insurance Company An Opportunity For Your Investment Dollars
Insurance companies have long been considered a safe haven for investors. Why? They are built to handle what could be large costs for an individual yet small for a large company. When managed well these companies can provide investors with a steady dividend and security.
All insurance companies are not created equal so it’s important to dig into the financials of each company, determine where they are in the market, and if they are worthy of your investing dollars.
Today we look at Mercury General (MCY).
Mercury may not be well knowing to everyone depending on what part of the country you live in. For us here at Bridges Twins, while we don’t currently own the stock, we have been long time customers.
A few highlights of the company:1
- The dividend yield is at 4.74% which is greater than 90% of companies in the space
- Their operating margin is 8.02% which is better than 61% f their peers
- Their debt to equity ratio is .2 and overall they have used debt less aggressively than 70% of their peers in growth
- Institutional ownership is 42%
What does all of this mean? If you are looking for a company that is less aggressive with debt and conservative this just might be your jam.
Why does institutional ownership matter? Large groups like retirement funds for workers can’t afford to take big risks. They have many people depending on them. They invest in companies that are established and have less risk. Institutional ownership, while not an exact measurement of risk, provides you insight into how large groups, who need safety, view the stock.
Should You Own Stock In the Maker of Your Car or Truck?
If you travel to work in a car or truck it’s likely a publicly traded company made that vehicle. It takes large economies of scale to produce automobiles and that tends to mean they are publicly traded.
Let’s say you drive to work in the #1 selling truck in America. That would mean you would be driving an F-series pickup from Ford (F). More than likely you are driving an F150. They sell roughly 600K+ of this truck on an annual basis.
A few neat facts about Ford before we get into some of the financials.
- Ford was founded in 1903
- They gained fame for creating one of the first truly affordable vehicles made on an assembly line (although Henry Ford did not invent the assembly line)
- They have consistently made the #1 selling truck in America for years with the F150
Do these facts mean you should invest in Ford? A great history doesn’t necessarily mean the company is worthy of your hard earned investing dollars.2
- Ford’s debt to equity is 4.75X and they have used debt more aggressive than 96% of their peers
- Their gross margin is 5.54% which is less than 71% of their peers
- Institutional ownership sits at 50.81%
- Ford has suspended their dividend during the pandemic of 2020 to save cash that would be needed for operations
Lately Ford stock has seen an uptick in demand. This is related to the new Bronco and the new electric Mustang that are slated to come out in the current year.
In full disclosure Ford is a stock that we have liked here at BridgesTwins before it became popular. We had believed that it was undervalued when it was at $9 per share and when it hit a 52 week low we invested additional dollars as we felt the stock was “on sale”.
Does this mean you should invest in Ford?
This really depends on where you see Ford going in the future. They continue to focus on producing trucks and electric vehicles. We continue to see Ford with a positive view however ultimately it’s up to you!
Twins Rules for Financial Success
As with all of our content here we want to encourage you to follow three core rules :
- Have an Emergency Fund/Squirrel Funds
- Invest for the Long Term
- Invest Automatically & Consistently
Information in this section from research done via etrade. We recommend all investors independently complete their own research and evaluation
2Information in the bullets comes from research on eTrade
