Common Stock Overview
Rated as an overall Buy by the Street, General Motors (NYSE:GM) stock offers investors solid opportunity for growth and return. The stock has an excellent forward P/E of 5.1. The dividend yield is a solid 4.66 percent, and it exceeded expected earnings for the 4th quarter. Prospects for 2016 and beyond are bright.
Recalls and Compensation Managed Effectively
The inherent risks of auto manufacture include defects and injuries; the 2014 costs include victim compensation fund claims and a significant number of recalls. The total of five million vehicles under recall was significant and increased by the latest round of 200,000 vehicles due to Takata airbag defects. Managing the risks, GM fourth quarter earnings were strong at $1.39 against expected earnings of about $1.21.
A Timely LYFT
GM has joined a consortium to invest in new technology for ride-hailing services. Uber and other successful models offer consumers an alternative to car ownership by having driver operated or robotic vehicles come to the customer's door. Lyft driver-less operations technology will develop a marketing model for the evolving and important vehicle sharing markets.
GM Versus Peers
Morningstar peer rating shows GM and Volkswagen (OTCPK:VLKAY) as the top rated companies in the industry. The giant Toyota (NYSE:TM) has advantages in size and volume; however, GM rates for efficiency, fundamentals, and management effectiveness. GM has its base in North America; the US and Canadian economies are generally models of stability and positive growth as compared with global markets.
GM vehicles still compete well in every part of the global market. Their flagship truck and SUV models meet or exceed their competition in Europe, Asia, and South America. They have a global niche as a manufacturer of high-performance light trucks. The luxury lines of Cadillac models compete with leading products from Porsche and Daimler-Benz in Europe and Asia.
The Russia and Brazil markets are areas of weakness. The Brazil Real devaluation had a greater impact than expected as did the GM tax position. The GM pullout from the difficult Russian market is a strategic step. Sanctions and the global oil glut have left the Russian economy in near collapse.
An Edge In Electrics and In China
GM has a strong electric vehicle line, headlined by the Bolt, and can offer competition for advanced electric vehicles such as Tesla (NASDAQ:TSLA). GM's growth potential in markets like India and China also relate to offering a range of fuel technologies as these economies begin to commit environmental changes; this will involve shifts to higher levels of renewable energy alternatives.
Impressive Cash Position
GM is an excellent buy candidate if the market slides into a bearish phase or correction. GM has a recent Ba1 bond rating and boasts an enviable cash position, which could act as a bulwark against international volatility. If the price falls, the opportunity is even more tantalizing.
In Sum: A Buying Opportunity
As a global leader in automobile manufacture, GM has a boundless market as populations expand in developing countries and overall across the globe. The dream of freedom and necessity of personal travel still relates to increased automobile ownership, mass transit vehicles, and alternative fuel vehicles.
GM meets the changes of pollution and environmental impacts head on by investment in alternative fuel vehicles, efficiency, and electric vehicles. They have a vital strategy for the emerging shared vehicle business model by participating in concepts like Uber and Lyft.
At an attractive price, we see significant upside to a GM investment now.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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.
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