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Barron's: GM stock looks dirt cheap

  • GM is seeing strong results on the sales floor, and with a rock-bottom valuation and 3.3% yield, shares could rise 30%, according to a Barron's profile.
  • Investors who look beyond the recall headlines will find much to like in GM, Jack Hough writes: U.S. light vehicle sales are the strongest since summer 2006, Europe's besieged car market has begun to recover with nine straight months of growth, and overall market share rose to 18.9% in June from 17.8% in May thanks to strong sales of SUVs and crossovers.
  • GM will struggle to top $3 in EPS this year after recall costs and other expenses, but next year it could earn $5, with two-thirds of the increase coming from simply moving past one-time costs, Sterne Agee says; if that's right, GM now trades at 7.5x next year's earnings, an 18% discount to Ford (NYSE:F) and a 50% discount to the market.
Comments (25)
  • Capt Jack Daniels
    , contributor
    Comments (660) | Send Message
     
    Value trap.

     

    When this bull market changes, GM will sink like a truck going over the bridge with 5 tons of rocks tied to its cargo trunk.

     

    You will not want to buy high and then have it go much much lower when the bear comes.

     

    I'd value the stock closer to 20 than 40, and in a bear market, I'd wait and you might actually see it reach single digits if management continues to botch and fubar things up.
    15 Jul, 06:00 PM Reply Like
  • Snoopy1
    , contributor
    Comments (1100) | Send Message
     
    If you want to be taken seriously, you really need to lay out an analysis with financial projections and valuation methodology.

     

    I've done my own analysis and think GM's current value is high $40s but look forward to why it's really $20.
    15 Jul, 06:21 PM Reply Like
  • JayXu
    , contributor
    Comments (258) | Send Message
     
    don't just bs here, go short GM
    15 Jul, 10:47 PM Reply Like
  • mikeRetirement
    , contributor
    Comments (76) | Send Message
     
    Looks like Warren Buffet just got "trapped"

     

    http://bit.ly/1ktNzoj
    15 Jul, 06:06 PM Reply Like
  • Frank79
    , contributor
    Comments (6) | Send Message
     
    I have to agree with barron this time. In this expensive market, there are several stocks that will have much higher EPS next year. These include GM, AAL, VLO, and GILD. Buy them when they are still cheap.
    15 Jul, 06:24 PM Reply Like
  • funfun
    , contributor
    Comments (2017) | Send Message
     
    What the perfervid protectors and proponents of GM Management do not want you to know:

     

    Warren Buffett and his affiliated funds and companies dumped 10 million shares of GM in Q1 2014, or 25% of total holdings. Perhaps he was anticipating continued malaise in this intractably weakened car-maker.

     

    …funfun..
    15 Jul, 06:25 PM Reply Like
  • The_Hammer
    , contributor
    Comments (3806) | Send Message
     
    buffett dumped JNJ about a 1/3 lower

     

    quality controls at GM are absolutely pathetic and these executives should have any bonuses and stock options clawed back. despicable performance. the little guy is held to primo standards and these crony overpaid execs are held to remedial levels. disc. long gm
    15 Jul, 07:57 PM Reply Like
  • mikeRetirement
    , contributor
    Comments (76) | Send Message
     
    It's now Q3. Perhaps he likes the way GM is cleaning up the mess. Perhaps he likes the job Mary Barra is doing. He certainly likes the product.

     

    Perhaps he likes the way sales continue to increase with higher margin products. Perhaps he increased his holdings in Q2.
    15 Jul, 07:04 PM Reply Like
  • Budavar
    , contributor
    Comments (1387) | Send Message
     
    GM management put on all shareholder's at enormous risk of
    virtually unlimited liabilities.

     

    Why?

     

    Because earlier this year GM successfully defended the issuance of a court order which would have grounded EVERY GM car subject to recall.

     

    Now, we have many millions of drivers driving many millions of GM cars subject to recall.
    What are the odds that just a few, even one, to get involved in a fatal accident?

     

    If we have any such in the next 18 months + beyond, the lawyers will have a feast on GM's carcass, with huge judgements, fines galore plus of course the grounding of all GM cars subject to recall. Millions? Who knows?

     

    But the only way out of that disaster may well be another bankruptcy.
    This time taxpayers not willing to pony up the billions to save GM's carcass again!

     

    Under these scenarios, not out of the realm of possibilities =
    any EPS for this year and any so-called "forward EPS"
    are simply indefensible on both ethical + on a professional basis =
    because even management does not know those numbers.
    15 Jul, 07:41 PM Reply Like
  • Econdad
    , contributor
    Comments (11) | Send Message
     
    Budavar, the open ended comment and accusations you just made would hold true for any corporation in the country; given the litigious nature of society currently. Mary Barra is doing a wonderful job and GM is going above and beyond by recalling cars they do not even need to. They are getting all "surprises" out of the way now and even are setting up a fund for the victims. Their product portfolio is really improving, quality is awesome, (JD POWER) and with the European markets starting to recover and Chevrolet being the new jersey sponsor of Manchester United.....things are looking up there. Disclosure: I am long GM
    15 Jul, 08:43 PM Reply Like
  • mikeRetirement
    , contributor
    Comments (76) | Send Message
     
    Budavar seems you are short the stock. Probably a little concerned.

     

    Your point seems a little far fetched. GM has offered a loaner for anyone concerned about driving their Cobalt. Not necessary, anyone without an keychain full of keys will be fine. If they don't listen to reason, don't wear their seatbelt and drive drunk, and can't handle a vehicle that has lost power assist, a fund has been created to enrich their heirs. It' more than generous on GM's part but won't bankrupt the company. Sorry!
    15 Jul, 09:39 PM Reply Like
  • Tdot
    , contributor
    Comments (3438) | Send Message
     
    Don't forget that GM still has some $10B of taxpayer cash left over from the bailout, including bankruptcy loans that were exchanged for shares handed over to Treasury, which were then sold on the cheap, and another $45B in tax credits from the years of losses. So GM has about $55B in bonus assets to pay off any conceivable litigation over the next several years, without needing to dip into their operating cash and earnings.

     

    In fact, any payoffs to litigants would represent more tax exemptions. Which means the taxpayers will pay for the litigation, as GM adds to their tax credits and continue to play in the industry tax-free.

     

    Congress and the States would have to go after GM hard - Tobacco Industry style - to really get deep into GM's shorts. The same Congress that went along with bailing out GM in the first place ... they have a lot invested in GM and the Union.
    16 Jul, 08:11 AM Reply Like
  • funfun
    , contributor
    Comments (2017) | Send Message
     
    Perhaps he likes a secretive and dishonest corporate Management, which inspires abundant faux trust and confidence with massive PR dissimulation.

     

    …funfun..
    15 Jul, 07:44 PM Reply Like
  • JDoe20
    , contributor
    Comments (295) | Send Message
     
    Perhaps he simply is open minded versus others who appear obsessed.
    15 Jul, 08:14 PM Reply Like
  • chopchop0
    , contributor
    Comments (3122) | Send Message
     
    I swear people have been calling GM a "value" for years now. Not true then or now. GM didn't exactly have brand "moat" before these recent recalls, and now with everything coming out, their image has only gotten worse.
    15 Jul, 08:56 PM Reply Like
  • Econdad
    , contributor
    Comments (11) | Send Message
     
    Actually, the recalls have been awesome for GM's bottom line. (outside of the one time charges) Tons more people on the lot means many more are buying new cars that otherwise would not have done so.
    15 Jul, 11:13 PM Reply Like
  • chopchop0
    , contributor
    Comments (3122) | Send Message
     
    "Tons more people on the lot means many more are buying new cars"

     

    Yeah, that's exactly what they want after having to bring their old GM car in a for a recall after hearing the news of dozens of deaths and a cover up for over a decade over <$1 part.... another GM vehicle

     

    Talk about spinning the news!
    15 Jul, 11:45 PM Reply Like
  • Uncle Pie
    , contributor
    Comments (2665) | Send Message
     
    GM should never have been bailed out by the taxpayers. Throwing away good money after bad.
    15 Jul, 09:06 PM Reply Like
  • Invest84
    , contributor
    Comments (57) | Send Message
     
    What does that have to do with GM's current valuation?
    16 Jul, 01:30 AM Reply Like
  • rwbrown.bvf@gmail.com
    , contributor
    Comments (68) | Send Message
     
    Uncle Pie- Amen, brother! As I had a Chevy salesman tell me 20 years ago: They
    could put that Bowtie on a cowpile (not his exact words) and millions of gullible
    people will buy it. Here on our farm, we have been tempted by GM a few times,
    only to regret it later. At least parts are cheap.
    15 Jul, 09:17 PM Reply Like
  • factsmatter
    , contributor
    Comments (100) | Send Message
     
    "Barron's: GM stock looks cheap."

     

    Let them buy it then.
    15 Jul, 09:49 PM Reply Like
  • Invest84
    , contributor
    Comments (57) | Send Message
     
    Does that earnings number include the payments they have to make to sure up the pension and healthcare benefits liabilities?
    16 Jul, 01:31 AM Reply Like
  • J38765
    , contributor
    Comments (89) | Send Message
     
    Rising sales and more importantly rising transaction prices will drive profits as GM goes forward. Along with VW and Toyota GM is light years ahead of all competitors in China and with 5 new plants under construction that advantage will grow. Pretty easy bet for the next 5 years.
    16 Jul, 04:41 AM Reply Like
  • funfun
    , contributor
    Comments (2017) | Send Message
     
    Given the global sharing of engineering, design and parts, how many of the millions of GM cars produced and sold in the Peoples Republic of China have critical latent defects? Or in Europe? Will GM shareholders be socked with multi-$billion recalls overseas?

     

    …funfun..
    16 Jul, 07:30 AM Reply Like
  • Capt Jack Daniels
    , contributor
    Comments (660) | Send Message
     
    Maybe he liked the previous solution of ignoring the potential deadly defects and hoping that father time would eventually remove the past defective death traps on the cheap.

     

    Works great until you get caught like GM has gotten caught.

     

    Now GM looks like the guy who got caught going through other people's wallets at the pool party. Untrustable and unworthy.

     

    Imagine what other problems they don't even know about but because of their dumb brain trusts and lack of competence are not even aware of the potential problems. Tax payer money needs to be returned with appropriate interest and GM needs to head back towards another pending bankruptcy or they need to fix their own problems without any bending of the rules and laws and without any more bail outs, or credits, or other corporate welfare or union protecting and bogus too big to fail mantras.
    16 Jul, 10:51 AM Reply Like
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