Market Sentiment & Performance - Bank of America's flow data indicates net selling of small-cap stocks by clients last week, while large and mid-cap stocks saw net buying [1] - 44% of fund managers surveyed believe large-cap stocks will outperform small-cap stocks this year, an increase from the previous reading [1] - The Russell 2000 is up only 1.5% year-to-date, indicating continued underperformance of small caps [1] Concerns & Cautions - B of A remains near-term cautious on the Russell 2000 index and does not expect any Fed rate cuts this year [2][4] - Tariff risk poses a greater threat to small caps due to their thinner margins [3] - Inflation remains sticky, leading to the expectation that the Fed will remain on hold, potentially negatively impacting the Russell 2000, which is sensitive to interest rates [4][5] - Small-cap earnings recovery has been slower than expected compared to large caps, with lofty expectations for the second half of the year [6][7] Opportunities & Recommendations - It is advisable to be selective within small caps, favoring mid-caps due to cleaner balance sheets and lower risk from tariffs and refinancing [8] - Despite risks, small caps offer wider performance spreads and alpha opportunities, with relatively cheap valuations compared to large caps [8] - Focus on higher quality areas within small and mid-caps, prioritizing stocks with positive revisions and stronger margins [9][10]

Quality & Recalls - Ford's initial quality is now highly competitive, recognized as the most awarded company and brand in JD Power's Initial Quality Study (IQS) [1] - Launch quality has surpassed competitors [2] - Recalls primarily affect vehicles engineered in 2015 and 2016, often involving software updates (OTAs) that are not significantly expensive [2] - Ford anticipates potential increases in recalls as a proactive measure to protect customers, with more inspectors and engineers focused on identifying quality issues in the field [3] Warranty & Cost - Base coverages account for 60% of Ford's warranty costs, which are expected to decrease as quality improvements are implemented [2] - Warranty coverages are already declining, indicating positive progress in quality improvements [4] - Recalls are considered the slowest metric to improve in terms of quality enhancements [4]

I think a lot of the other companies in our space, they're just not technology companies at the end of the day. They are either body shops or they are body shops masquerading as technology companies. One of the things that we simply tell everybody when we first join.Quality is the most important thing. Yeah, it's more important than anything else. I definitely want to sell for 30 billion or even 100 billion.I mean, if you think about us as a company, I already have everything I want. Yeah, we're profitable. ...