General Motors Corporation (GM)

Scores really well on a valuation basis and is trading at 3X EBITDA. Good ROE in the 20% range and beat on the last quarter. There is no good reason for this to be trading at the low end of its range, but this is a market that has checked back and a lot of stocks like this have checked back with it. As we see better employment numbers, it is certainly a reason for people to start to upgrade their cars. The only knock against this is that price momentum has turned lower with a lot of other things in the market.

(A Top Pick Sept 19/14. Down 3.98%.) This has been way down recently because of China concerns. Had thought the recovery in Europe might have been a little bit better. Sold his holdings at a profit. The cycle for original equipment manufacturers is getting kind of long in the tooth. (If you own, consider Selling.)

(A Top Pick July 3/14. Down 16.5%.) Continues to be absolutely hated by the street. Analysts continue to knock it down. The price targets they are giving seems illogical. They should be reporting their best year since coming out of bankruptcy. He is expecting well over $4 a share in earnings, and $5 next year. 4.6% dividend yield. Thinks the concern right now is their exposure to China.

(A Top Pick Aug 18/14. Down 5.35%.) Sold his holdings in April at a profit. When he recommended this, it was an inexpensive stock and was trading at very low multiples. A lot of the catalysts have played out.

Feels this is a Hold at best. He would probably be doing what the Canadian government has been doing, cashing in on the moves in the last couple of years. Feels the auto cycle is slowing down a little and these guys have a hard time generating earnings growth in Europe and in the far east. The stronger US$ is obviously going to hurt them.

(A Top Pick July 3/14. Down 2.69%.) The recall hit them, which slapped the stock down. Still thinks this is going to be the breakout year in terms of earnings. Not expensive.

Auto sales have been at the highest level since 2005. This one has had some specific problems, obviously the recall and the new CEO having to deal with those issues. With lower gasoline prices, it should help the producers of larger vehicles. They are doing pretty well in China although the slowdown there has been hurting a bit. He would prefer a Canadian auto parts manufacturer.

If you are going to be stepping into an auto sector right now, he doesn’t know if he would be going into a US manufacturer. The auto cycle is getting a little bit extended, but more important, the strength of the US$ is going to be such a headwind going forward. He would rather play something in Canada like Martinrea (MRE-T), a parts manufacturer with a lot of European growth. They have a production profile over the next couple of years that is going to show some growth, and is trading at about 10X current earnings and 4X operating cash flow.

Basically bought this right at the 200 day moving average. 2^nd largest manufacturer globally in terms of cars and trucks. US auto demand trend is still moving higher based on improving consumer confidence. Lower gasoline prices are going to bode well for their light truck and SUV market. Average age of autos is 11 years plus, which is a catalyst for the demand refresh cycle. Recently announced a $5 billion buyback. Trading at 7X forward PE with a 12% long-term growth rate. Dividend yield of 4.05%.

(Top Pick Feb 11/14, Up 10.70%) He rotated out of GM-N and went into parts makers. It was proving to be so painful with the recall mess. There is tremendous long term value there and a lot of capital to be potentially returned. He moved to MG-T and LNR-T.

(Top Pick Mar 10/14, Up 7.38%) Light trucks and SUVs are going nuts in the US and that is where the auto makers make their money. Still a good buy. There are a lot of new cars being sold as the fleet gets replenished.

Has $37 billion in cash. Trading at an 8X multiple, so it is dirt cheap considering the market is at around 16X. There is definite upside because it is cheap. He does think we are getting in the later innings in the OEM space, but thinks this one has some life given its low valuation.

Stock has been hit because of the lawsuits and all the issues that are going on, but he sees a better year in car sales in 2015, and this company increasing its market share and improving sales outside of North America. Low gasoline prices and low interest rates help spur car sales. Dividend yield of 3.35%.

Not the company to own in this sector. Although it has a good dividend yield. They handled their issues poorly. Prefers F-N, who have better management and better products and better European & Asian businesses. Also prefers European auto companies to GM-T.

Thinks there is a valid reason to buy this today. Has had a big pullback. The issue on this is that things seem to be slowing down globally. The numbers for sales looks pretty strong in North America again, with a little bit of weakness in Europe. Asia continues to be strong. There is still a lot of work to be done and it is going to be a bumpy road. Feels the valuation provides a good cushion.