General Motors (NYSE:GM) is a company I purchased back in 2013, when I believed it was deeply undervalued; it has just had some major ups and downs during the holding period - mostly seems like it was downs, though. But I remained steadfast in my position, and am only down 0.86% inclusive of reinvested dividends and dollar cost averaging, while the stock itself is down 7.66% and the S&P 500 is up 11.05% in that same time frame. I always maintain that you must stay prudent and do some homework on the names in your portfolio. With the last article I wrote about the company, I stated, "I believe the stock can continue to rise along with the broader market but it has breached my $35 line in the sand to the upside for purchasing more shares, hence this week will be the first week in a very long time that I won't purchase shares." Since that time, the stock has come down below $35 again, and with that said, I'm going to take a look at the stock right now and see what has happened recently.
The company came out recently saying that it is on track to achieve profitability in Europe by 2016, and reiterated that it is on track to reaching its financial goals for the year with higher earnings before interest and taxes in 2015. Lately, we've been hearing about an excessive amount of companies cutting back on their capital spending budgets, but GM said that it's going to actually increase its budget from $7.5 billion to $9 billion. Hopefully, with the new budget, we'll see better efficiencies and/or more revenue coming.
Buick is the brand under the GM umbrella which almost everyone forgot about, but in the past few years, it has definitely rebounded. During 2014, Buick sales led all GM vehicles with an astonishing 13.3% increase from 2013 to a total of 1.17 million units. On the year, the parent company increased global sales by 2% from 2013 to 9.92 million units, not bad considering the debacle of a recall happened early on in the year. This shows that the consumer is willing to forgive and forget for past transgressions because the company has shown good faith to commit its best work to them. Sales across the globe were all pretty much positive, with Brazil being the worst performer, dropping 10.9%, while China showed the most growth, with a 12% increase in unit sales.
Everything isn't all roses, though. European registrations for GM decreased by 5.4% during the month of December. Only 68,565 vehicles were registered, per a press release from the European Automobile Manufacturers Association. Unfortunately, all of Europe dropped 4.6% when compared to 2013, but the company retains 7.1% of the market share on the continent. Europe continues to be the Achilles' heel for the motor company hailing from Detroit. Hopefully, with the quantitative easing program going into effect in Europe, we'll see some trickle down into the automobile sector, and GM can rise from the ashes.
I titled my last article as "Optimistic But Cautious With General Motors" and it was for good reason. At the time, the broader market was moving up, and along with it was GM, but I felt that the broader market could also decline, as it looked like it was on shaky ground. Certainly, it did decline, and GM went along with it, but I'm taking that as a buying opportunity now. I just placed an order to buy a small batch early next week because it is below my $35 purchase target price and is yielding 3.56%. There may have been a bit of a disappointment when investors didn't get a dividend increase this coming quarter, but I prefer the company to be conservative for now, given the volatility around the world right now.
Disclaimer: This article is in no way a recommendation to buy or sell any stock mentioned. This article is meant to serve as a journal for myself as to the rationale of why I bought/sold this stock when I look back on it in the future. These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade, and happy investing!
