General Motors: A Strong Buy Below $20

| About: General Motors (GM)
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When companies make wise moves related to expansion, things generally look good for the company. General Motors Company (NYSE:GM) has done this recently, but I must admit that it may be a bit of an exception. In the long run, I think the stock is in a good position, but the negative news will have a more immediate impact and has already caused the stock price to drop.

Currently, the stock sits near its 52-week low of $19 (currently, trading around $19.50). General Motors has always featured a solid EPS (3.32), so it will keep investors around. However, if the share price keeps dropping, it could drive some impatient investors away. There is certainly negative news around GM, but there are positive factors on the horizon. In this article, I will examine both, and show you why GM is a good stock to keep in your portfolio for the long run.

General Motors is paying close attention to which markets provide the most success, and it is working to capitalize on these markets. For example, the company has plans to expand the production capacity of its plant in St. Petersburg. While the capacity is at 98,000 vehicles for now, General Motors hopes to expand it to about 230,000 vehicles. All of this is in response to the fact that the company increased sales of Chevrolet, Opel, and Cadillac sales by 53% in Russia last year. Furthermore, auto sales are currently up 15% in the country for this year, so this is a strong market for the automotive industry. General Motors is responding promptly and should be in a good position to benefit from this market.

This is not the only area where General Motors is expanding, as it will also be adding 800 new jobs at its plant in Arlington, Texas. Due to the economy and ever-changing gas prices, the company had previously relied largely on overtime to meet demand, but it is now taking action to change this. I believe the company will be better able to meet demand through the addition of these new employees. Furthermore, it will improve employee morale and give General Motors a better reputation as a workplace.

General Motors is also beginning the production of the 2013 Chevrolet Malibu and Cadillac ATS. This is not such a huge development, but it is necessary to keep things running smoothly. Furthermore, the company is making other moves, as it donated $50,000 to local charities. It will also provide over $1 million in funding to almost 200 companies in 43 plant cities. This should help improve the communities where General Motors' employees live and work, so it will also improve employee relations. It also makes this big company seem like a more connected part of the community and makes it seem kind and caring.

The company is in the news for negative reasons as well. Despite all these actions to improve employee satisfaction, General Motors is upsetting its past employees. Its new pension plans will affect roughly 118,000 retirees, and many remain upset about the changes that General Motors is making. Retirees have even threatened to stop buying General Motors vehicles. While this would not make a huge difference in sales, it would give this event more publicity and lead General Motors to receive bad press.

In even more troubling news, General Motors recently had to recall 475,000 Chevrolet Cruze compacts as a result of engine fires that customers were reporting. As this car has been one of the best-selling compacts over the past couple years, this recall will certainly hurt General Motors. The vehicle was already beginning to struggle a little due to competition from Toyota's (NYSE:TM) Corolla and Honda's (NYSE:HMC) Civic. This event will probably amplify this trend and allow Toyota and Honda to take an even larger market share. Toyota is also in the news for the expansion of a partnership. It recently became clear that Toyota will provide hybrid technology to BMW, which goes beyond how the companies previously collaborated on diesel engines and electric car batteries.

There is more competition out there as well, and General Motors may be attempting to address it. As Tesla (NASDAQ:TSLA) has recently begun delivering its Model S sedan, General Motors has attempted to promote its Chevrolet Volt. It has mailed books, window clings, and information cards to Volt owners, hoping that they will help advertise the vehicle. This may or may not be an attempt to counter Tesla's Model S, but I simply cannot see this making a huge difference. Tesla will retain its portion of the electric car market, and I think this will turn out to be a rather small, ineffective marketing move from General Motors.

General Motors has problems beyond its competition as well. Ford (NYSE:F) and General Motors posted impressive sales numbers at the beginning of the year, but this have begun to drop over the course of the past three months. As analysts begin cutting sales projections, these two companies will struggle for a little while. I think the expansion in Russia is a good way for General Motors to combat the decline in sales, but this decline will certainly still have a negative effect on General Motors and Ford stock prices.

General Motors is far below its $33 price target, but there's nothing to suggest it can't make a resurgence in the second half of 2012. Expanding its operations would certainly help, and healthy car sales should keep it chugging along too. It's going to be GM's international presence that gives it the boost it needs. I don't see General Motors getting to $33 this year, but if you can buy in at under $20, you won't need that big of a gain. Expect something moderate to come out in the next quarter. If you can tame expectations, you will find General Motors to be a solid play.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.