General Motors Corporation (GM)

(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.

All the recalls that have been happening, have had an effect on the stock in general. With lowering costs happening now and possibly in the horizon for some time, that could be a catalyst for consumers to continue to buy cars or bigger cars, and GM would fit that model. There is a refresh to the car cycle as the average car is still 12-13 years old in the US.

There are 17 million units in the US in terms of vehicle sales. A large portion of their sales would be coming in China, but he understands that is slowing down. He thinks all large cap stocks will do well. However, there is better value elsewhere.

Automobile stocks and the component manufacturers tend to do well more into the spring, from March into May. This stock has a bit of a negative profile. There has been some strength from the October lows and has been a fairly reasonable trade. It can do well along with the market, but the longer-term trend is lower highs and lower lows. He would expect that to continue.

He has tended to stay away from the automotive business, because it is very cyclical and a huge consumer of capital. It is a very, very tough business to survive in. The car cycle still has some room to run, so he feels you could be here if you really want to be invested in the automotive sector.

(A Top Pick Feb 11/14. Down 5.93%.) This has been a tough year with all the recalls. It remains an incredibly cheap stock, trading at around 3X next year's EBITDA. Thinks the car sales in the US will hold up. Lower gas prices will help that. Carries an enormous amount of tax loss carry forward from its bankruptcy. He trades around this a lot using Short Puts.

Stock has been beaten up, so this is an attractive entry point. This is reflected in the valuations. Trading at 8.1X forward earnings. They have bungled some things, but you are seeing a strong pick up in growth. They are going towards more standardized footprints so they can produce multiple cars on the same chassis in different styles. Opel division in Europe has been a bit of a headwind, but their Cadillac is doing quite well in China.

(Top Pick Oct 09/13, Up 2.33%) Hated hearing about the recalls. It is a black mark on the company. Emerging market opportunities are tremendous and he is looking 3-5 years out. He is positive on this one. They are generating a log of free cash flow. Dividend probably won’t go higher next year. Fat dividend, low valuation.

It has been in a downward trend, underperforming the market and close to its 20 day moving average. Three technicals are going against you so not a buy. This is a period of seasonal weakness. They bottom around the end of October and then move higher through the end of the year. Auto makers are transitioning from one model to the other.

Thinks this is a good opportunity. Expect we will see the run rate for production go from 16.5 million units up to 18-18.5 million before the cycle ends. There is good opportunity in Europe. Comparing this to Ford (F-N) the fundamentals are similar with Ford having a little more exposure to Europe. GM has the overhang of recalls while Ford doesn’t. Expects that 3-4 years from now they will both have done reasonably well.

Tremendously attractive, low valuation and opportunity to move toward more global manufacturing. Headwind is the recalls. They have to move toward more of a quality mandate. Great sales in China. If it drops due to recalls, then it would be an even better buying opportunity. It just happens to be GM’s turn to have this issue.