General Motors (GM) - while still nowhere near its heyday - looks like it's doing the right things to continue its slow climb back. And currently trading at around $22, it could be the right time to get in. GM recently announced plans to partner with prominent soccer franchise Manchester United and forgo Super Bowl advertising, representing a shift to a more global marketing strategy. This increased global presence, as well as increasing confidence from investors, makes GM an interesting company to watch.
Partnering with Manchester United looks to be a great move for GM. Manchester United is about as big as it gets as far as global presence for sports teams, with fans all around the world. The move drastically increases the presence of GM's brand in Europe, where Manchester United plays its games in England's Barclays Premier League and the inter-European league of UEFA.
The football club claims it has 659 million fans throughout the world, 89 percent of which are outside of the Americas, the primary market of GM vehicles. Thus, it seems this is a great move to increase the global presence of GM's brand in countries where companies like Toyota (TM) and Hyundai reign supreme. Of course, one must be careful not to be too bullish over sponsoring a sports team. However, as marketing pioneer John Wanamaker once said, "Half the money I spend on advertising is wasted; the trouble is I don't know which half." To me, this looks like money well spent.
The sponsorship deal with Manchester United comes on the heels of GM announcing it would forgo advertising in the Super Bowl. Again, this seems to represent a shift to looking to market the brand more overseas as opposed to within the U.S. Obviously, GM's performance in America is extremely important, but I think it's a promising sign for the company that they're willing to market outside the box.
GM also made headlines recently by their decision to drop its advertising from social network giant Facebook (FB) just before its much-anticipated IPO. GM felt when it came to social network advertising, it just wasn't getting the bang for its buck it needed to justify continued investment. And to be sure, the efficacy of advertising on social media is murky at best. The main reason for this is that advertising on Facebook is different from advertising on search engines - such as Google (GOOG) - because while people go to Google because they are actively searching for something, people go on Facebook to comment on their friends' photos or update their relationship status. Not exactly prime time for clicking on ads.
I completely agree with GM's move, as I'm not sure the average user of Facebook - especially 14-year-old girls, who I'm convinced make up 95 percent of Facebook's actual users - is in the market to buy a GM vehicle. Marketing expert Rob Frankel believes that these recent decisions by GM are great moves for the company:
My hope is that GM's decision [to forgo Super Bowl advertising], and to move away from Facebook, suggests that someone there - and maybe others in the industry follow - is really starting to look at what sells the brand, instead of focusing on the buy.
GM has also recently benefited from some positive press on the part of financial analysts and experts. Recently, Moody's released a statement that shed some positive light on the outlook for GM, hinting that it may be prepared to endorse investment in the near future. However, on the same day, Moody's also announced good news for GM's competitor, Ford (F). The firm said it was ready to "elevate [its] debt to investment grade status."
In addition, Ford is anticipating a very strong month of sales when the numbers for May are released. But even though Ford is a direct competitor to GM, good news for American car companies in general is typically good news for GM specifically. There are those who argue increasing demand for cars in the U.S. will actually benefit companies like Toyota and Honda (HMC) more so than U.S. automakers, but I think a less volatile American economy benefits GM regardless. And let's not forget: GM took the top spot in worldwide sales from Toyota last year.
More good recent investment news for GM came with the discovery that Warren Buffett's Berkshire Hathaway was investing in it. Investors have differing explanations for how and why Berkshire Hathaway ended up deciding to invest in GM, but regardless, the move should signal to investors that perhaps it's time to buy into GM. If it's good enough for Warren Buffett, perhaps it's good enough for them too.
Overall, it does seem that investors are a little more bullish on GM than they have been in the past. One writer recently argued the stock would hit $30 by 2014, which would be a pretty nice gain for the automaker. The analyst also praised GM's aforementioned plan to increase its presence in Europe:
With higher second quarter results and an improvement in the European markets, I have no doubt in my mind that GM will see new heavily piqued interest from investors this year.
Finally, GM's presence in China will also be a key factor in its growth going forward. What's the hottest luxury car in China? Lexus? Mercedes Benz? Nope - Buick. While that seems strange to Americans who are used to seeing Buicks driven by their grandmothers, in China, Buicks are cool. Indeed, the brand was struggling mightily until its success in China. The success of Buick in China has been great for GM, and its continued growth will certainly be a factor in the future.
All in all, it seems that things could be turning around for GM. When considering its recent plans to advertise with Manchester United, drop Super Bowl and Facebook ads and the recent good press from investors, I would take a chance on the automaker.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.