General Motors Corporation (GM)

Has been a challenged stock this year. More recalls every day, but he thinks they are getting it under control. There is significant upside but you have to be patient. He owns Ford as it has a better growth prospect. GM is in the right space. You will do quite well over time.

You can’t get any more negative than this one is right now. Every day there is a recall. His model prices $40.98, and 18%-19% upside. There is lots of value here. The China market is probably keeping this company going. He would buy a half position, and possibly wait for the 2^nd quarter balance sheet. 3.47% dividend yield. You want to buy large-cap stocks when it is “ugly healthcare” for them.

If you own, you have done pretty well with this since the government sold their stake. The current pullback could be a buying opportunity. At the same time, we don’t know how many more recalls are to come. Sentiment is not very positive towards this company at the present time, and we don’t know what size liability there will be.

Not as an attractive looking chart as Ford (F-N). Chart is not showing any signs of consolidation yet. After a stock has been moving down, he wants to see it start to consolidate and stop making lower highs and lower lows. This is still in a downtrend.

Chart is showing a little of a head and shoulders top, but the pattern doesn’t always mean it is going to come to pass. The potential breakdown is at around the $32-$33 range. The present price, to him, would make it a really good risk/reward from the standpoint that you could Buy it here, sort of break down below $32, and give yourself a few percentage points. Take 3% minus $32 and that would give you a pretty good place to define Stops. He would take a punt and if it breaks $32 you know there are some bigger issues. The recall stuff has already been factored in.

He is very pleased with all the recalls they are having. At the end of the day, they will get past this. If the indication of positive sales is as they were in March/April, they’ll get past this. Valuation is extremely cheap. There is a potential for them to earn $5 a share in 2015. If that happens, this is a $50 stock. There is downside protection with the dividend. Generating a lot of free cash flow, but unfortunately the balance sheet is getting eaten up by all these charges. The good news is that when they have recalls, not all the cars that are recalled are available or in use.

The whole recall, which has hit Ford (F-N) as well, has been an overhang on auto stocks. Auto demand has fallen back to more normal levels. Would prefer investing in companies that sell into that sector instead. US government has sold their holdings at a loss.

Auto group is one he likes as a sector, but prefers parts companies and sub assemblers. It has consolidated over the next few months. He is still not there technically. Numbers out today were a little bit better.

Would probably shy away from this because of the recent negative publicity. Execution from a management standpoint is a very important part of the fortunes of a company because it affects the valuation. How many dollars are we willing to pay for each dollar of earnings, revenue or cash flow. Ford (F-N) in this space is an interesting situation. Their European operations are improving and they expect overall unit growth is going to be around 3%. Good valuation and good management.

Thinks they can earn about $5 in a year, making them 8.5 times earnings. Thinks management group is very impressive. Notwithstanding issue on recalls. Europe is turning the corner, China is doing very well and US has strong numbers.

Sold GM before everything started turning south for them on the recall issue. It is a case of how it can blow up and really impact the company. There was a lot of growth projections for the company, cost cutting, and it seemed like a lot was baked into the share price so she backed off. She is content to stay on the sidelines. She is out of the space presently.

A tough call right now. He got out a while ago and wants to get back in, but is worried about the recall notice issue. It will be a headwind for a while. Likes the sector. Not as cheap as last year, but below on a market multiple basis. We are close to a buy point. Don’t sell if you own it.

Prefers auto parts companies. The company has done fairly well. The government has got out of it so it is no longer government loaded who sold their holdings at a loss. You don’t have the overhang of the healthcare benefits and pensions. Since it came back to the market, there was a period in 2011-mid-2012 where it wasn’t doing very well because there were concerns about the possibility of a recession in the replacement cycle. Since then there has been a gain in confidence. The company has a very strong position in China and Latin America. However, we are fairly well into that auto cycle. Wouldn’t be a big fan of this.

Have reinstated their dividend since buying out the US government. Cleaned up a lot of their legacy labour and health problems as a result of their bankruptcy. Selling their cars like crazy. Most of the forecasts are that we are going to have a record 2014/2015 as we replace a lot of very old vehicles. Trading at 10X forward earnings. Yield of 3.26%, which he expects will go up. $45 in 12 months seems reasonable to him.

Auto industry has made a pretty strong comeback over the last little while. If you see more consistent GDP growth in the US then you will see good growth in GM. Prefers Ford because of products and because they didn’t need help in 2008.