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Tuesday, January 14, 2014 11:31:47 AM
About a month ago, Kyle Bass of Hayman Capital, announced a significant stake in General Motors (GM) claiming, "GM equity represents one of the most compelling risk/reward situations of any large cap in the world today." Incidentally, Mr. Bass was also a beneficiary of the short subprime trade and he too learned of the idea from another investor.
Warren Buffett and Kyle Bass are both great investors but their styles aren't very similar. Yet, Warren Buffett is also a large GM shareholder with around 40,000,000 shares. Additionally, a couple of really smart billionaires both named David---Mr. Einhorn and Mr. Tepper, also like what they see at GM. Even banks have joined the bandwagon -- Goldman Sachs has added GM to its high conviction list.
So why is it that the smart money seems to love GM? Because it's a cheap transformer. Let us explain.
Buffet likes companies that are not only cheap, but he also needs a margin of safety and a strong brand. Since exiting the crisis GM's balance sheet has improved drastically. With a cash position well over $20B, and increasing FCF, this margin of safety is only getting stronger. The screenshot below shows a quick summary.
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Regarding valuation, GM is cheap on many levels, as the charts below make clear.
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In terms of brand strength, it would be difficult to find many companies with stronger brands.
General Motors was once said to be synonymous with the American economy, there's not a man, woman, or child that isn't aware of the brand. But many are not aware of the transformations around the corner.
Say Goodbye to Government Motors...Say Hello to the New Heartbeat of America
"Like us, there's more to them than meets the eye." -Optimus Prime, Transformers (2007)
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With Uncle Sam no longer with its foot on the brake pedal, and cash mounting on the balance sheet, look for a new a growing dividend to commence. In addition, the fact that GM is pulling the plug on failed projects shows that they are learning from mistakes and not throwing good money after bad ideas.
GM is still the leading car company in the world's two largest markets; China (which became number one in 2009) and the US. The increasing purchasing power of Chinese consumers and the need to replace the aging cars on US roads will both continue to drive demand in the next several years. As this recent article from business insider points out, GM is selling more cars in China than ever before and sales are growing at over 11% annually.
Those most familiar with the transformations taking place are the insiders. And it certainly seems they like what they're seeing -- notice the recent insider purchases below.
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It's no wonder then that the smart money is throwing more and more good money at GM.
Recent GM News
- Honeywell Acquires CAES Systems for $1.9 Billion, Sarepta Therapeutics Surges 34%, Gilead Continues Gains • IH Market News • 06/21/2024 12:00:38 PM
- Goldman Sachs Raises S&P 500 Forecast for 2024; Disney Secures Deadpool & Wolverine in Chinese Cinemas, and More • IH Market News • 06/17/2024 10:49:12 AM
- Tesla Surges 5% in Pre-Market; Virgin Galactic Drops 9% Following Reverse Stock Split, and More News • IH Market News • 06/13/2024 11:24:25 AM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 06/12/2024 10:07:32 PM
- Paramount Ends Skydance Talks, Oracle Shares Surge 8.7% on New Partnerships, and More News • IH Market News • 06/12/2024 11:19:10 AM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 06/11/2024 10:11:09 PM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 06/11/2024 08:10:30 PM
- GM Board Approves New $6 Billion Share Repurchase Authorization • PR Newswire (US) • 06/11/2024 11:10:00 AM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 06/10/2024 08:47:32 PM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 06/10/2024 03:47:08 PM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 06/07/2024 10:32:22 PM
- Form 8-K - Current report • Edgar (US Regulatory) • 06/06/2024 09:02:59 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 06/04/2024 09:06:52 PM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 05/31/2024 09:03:26 PM
- Form SD - Specialized disclosure report • Edgar (US Regulatory) • 05/31/2024 01:23:28 PM
- DJT Stock Falls 6% Post-Trump Conviction; UBS Restructures Senior Management for CEO Succession and More News • IH Market News • 05/31/2024 11:54:10 AM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 05/30/2024 10:36:05 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 05/30/2024 10:33:42 PM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 05/28/2024 08:53:58 PM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 05/28/2024 08:45:59 PM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 05/28/2024 02:36:01 PM
- Form DEFA14A - Additional definitive proxy soliciting materials and Rule 14(a)(12) material • Edgar (US Regulatory) • 05/28/2024 10:59:28 AM
- Workday Shares Drop 12%, VF Corp Divests Assets for Cash Boost, and More • IH Market News • 05/24/2024 12:42:24 PM
- Bridgestone Recognized as Top Global Supplier by General Motors • PR Newswire (US) • 05/23/2024 01:00:00 PM
- GM Defense and Mistral Inc. Announce Strategic Collaboration to Enhance Tactical Capability • PR Newswire (US) • 05/20/2024 12:30:00 PM
Last Shot Hydration Drink Announced as Official Sponsor of Red River Athletic Conference • EQLB • Jun 20, 2024 2:38 PM
ATWEC Announces Major Acquisition and Lays Out Strategic Growth Plans • ATWT • Jun 20, 2024 7:09 AM
North Bay Resources Announces Composite Assays of 0.53 and 0.44 Troy Ounces per Ton Gold in Trenches B + C at Fran Gold, British Columbia • NBRI • Jun 18, 2024 9:18 AM
VAYK Assembling New Management Team for $64 Billion Domestic Market • VAYK • Jun 18, 2024 9:00 AM
Fifty 1 Labs, Inc Announces Acquisition of Drago Knives, LLC • CAFI • Jun 18, 2024 8:45 AM
Hydromer Announces Attainment of ISO 13485 Certification • HYDI • Jun 17, 2024 9:22 AM