GM: No Respect

| About: General Motors (GM)

Summary

GM consistently sells at less than 5 times earnings, despite a yield of almost 5%.

Tech companies are not going to replace car companies. They're going to partner with them.

This company still has the wind at its back, and it's cheap as chips.

Over a decade after his death at the age of 83, Rodney Dangerfield still doesn't get any respect.

General Motors (NYSE:GM) CEO Mary Barra knows how he feels.

Consider all this. GM revenue is up 10% year-over-year. It's still almost 40% bigger than Amazon.com (NASDAQ:AMZN), based on sales. The stock sports a yield of 4.83%, and last quarter's 38 cent/share dividend was covered 4.5 times by earnings.

The Price/Earnings multiple the market is giving this monster? Less than 5.

It's getting silly. Yes, they took the bailout. Yes, they kept their unions. Yes, they still build cars in the United States of America. I get you may hate the Administration, hate the unions, and even hate American manufacturing for its high costs.

But a P/E of 5? Really? Really.

It's not like GM is about to be replaced any time soon. Both Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) and Apple (NASDAQ:AAPL) have both signaled , in the last week, that they're backing away from the whole idea of making cars. Tesla (NASDAQ:TSLA), even with its most optimistic projections, can supply less than 5% of the U.S. car market.

What is your problem?

Electric cars? GM makes an electric car. GM and the other U.S. car makers are heavily committed to electrics, because they have to meet a 2025 CAFÉ standard of 60 miles per gallon and electrics are the only way to get there. I understand that electric cars have fewer moving parts than those that run on gasoline or diesel, but that doesn't mean GM is about to be replaced.

Autonomous cars? They're still cars. They also provide an opportunity for companies like GM to get into the leasing business, again. That's why the company bought a stake in Lyft (Private:LYFT), to learn about that business. As cars move to autonomy, the entire car fleet has to be replaced over a period of a decade. That's over 250 million vehicles. We haven't even talked about the global market.

Peak auto sales? OK, but even a slower run-rate is bound to be profitable. The company has learned how to adjust production to market trends. The current margins of about 5% are sustainable. And those margins are higher than for retailers like Wal-Mart (NYSE:WMT), which sports a P/E of 16.

GM isn't going to get all that business. GM has only 19% of the U.S. market and, of course, a much smaller piece of the global pie. Also, yes, GM is globally competitive again. The company has plants in over a dozen countries and partnerships with a host of other car makers. The network is weaker than it was before the crash, and the company shuttered dozens of plants, but it's no weakling.

For a long term investor, this should spell opportunity. Isn't this why you have a diversified portfolio? Ever heard about rebalancing? Rotate out of hot markets, into cool ones. Adjust the portfolio. GM is not going to be selling at a P/E of 5 forever. I'm not saying it's ever going to be Google, but if it can get into double-digits the stock price should come close to doubling as well.

And it's not going under again, either. Give it some respect.

Disclosure: I am/we are long AAPL, AMZN, GOOGL.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.