Author Topic: GM - General Motors  (Read 434122 times)

PlanMaestro

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GM - General Motors
« on: May 22, 2012, 01:57:09 PM »
I never expected to say this but after its reemergence from bankruptcy General Motors looks very cheap. The history of Peter Lynch's investment in Chrysler in the early 80s, the investment that made Magellan, might be appropriate. There are also TARP warrants that seem mispriced.

P/S 0.22, P/E 6.3, $32B in cash and marketable securities with only $9B debt, all that for a marketcap of $34B. I have not gone through the cash flow details, the pension liabilities, accrued liabilities, or the product line-up but I imagine that others can jump on this.
 
Here are a couple of articles on the pent-up demand tailwind:

http://seekingalpha.com/article/605651-why-u-s-auto-sales-are-still-too-low?source=email_authors_alerts&ifp=0
http://www.economist.com/node/21548275
http://www.economist.com/node/17902837
« Last Edit: May 22, 2012, 02:11:37 PM by PlanMaestro »


hyten1

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Re: GM - General Motors
« Reply #1 on: May 22, 2012, 02:59:24 PM »
they do have a decent size pension obligation, but even with that i still think gm is cheap, i have a position in it

beerbaron

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Re: GM - General Motors
« Reply #2 on: May 22, 2012, 06:37:07 PM »
I have not checked GM but my gut would tell me that after the bankruptcy the pension liabilities were brought back to a realistic assumption. When a company is operating normally it can play around with numbers, but when in bankruptcy a lot of people ask questions and you are forced to take more realistic assumptions.

BeerBaron

alertmeipp

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Re: GM - General Motors
« Reply #3 on: May 22, 2012, 07:01:29 PM »
how's GM's product line compared for Ford and Chrysler?


rogermunibond

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Re: GM - General Motors
« Reply #4 on: May 22, 2012, 07:01:45 PM »
http://www.ft.com/intl/cms/s/0/99245856-a0c4-11e1-851f-00144feabdc0.html#axzz1vY1q8W3Y

FT had a piece today on GM's troubles in Euroland with Opel.

17thstcapital

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Re: GM - General Motors
« Reply #5 on: May 22, 2012, 07:07:56 PM »
Opel/Europe is a mess and likely will be so for a while.  Doesn't look like it will be easy for the company to get out of this mess. 

Pension + OPEB is around $25bn and will likely grow given low rates.....still very high but manageable given hefty cash balance. 

Looks like stock is trading at ~2x EBITDA.  Tarp warrants are attractive as is the mandatory convertible pfd which has a current yield north of 6%. 

bargainman

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Re: GM - General Motors
« Reply #6 on: May 24, 2012, 08:55:33 PM »
Do you know what the symbol for the preferred is? and the terms for conversion?  What about the warrants?  Thanks.

17thstcapital

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Re: GM - General Motors
« Reply #7 on: May 25, 2012, 04:48:02 AM »
Do you know what the symbol for the preferred is? and the terms for conversion?  What about the warrants?  Thanks.

Info on the warrants:
http://www.gm.com/company/investors/FAQs/Warrants.html

Pfd has a mandatory conversion on 12/1/13.  Quarterly dividend of $0.59375.  Shares vary depending on price of the common but below $33/sh on the common, pfd converts at ~1.51 shares of common per 1 pfd.  Ticker: GM-PB.

PlanMaestro

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Re: GM - General Motors
« Reply #8 on: May 25, 2012, 07:53:55 AM »
I guess we are finally hearing our engines roar.

Pent-up demand to lift US car sales
http://www.ft.com/intl/cms/s/0/0d7518a8-a5a2-11e1-a77b-00144feabdc0.html#axzz1vdTZyhIt

Much of the predicted increase is a result of the sharp fall-off in sales this time last year as manufacturers worldwide struggled with the inventory shortage following the March 2011 earthquake and tsunami in Japan. Analysts said the Japanese manufacturers Toyota and Honda will show the biggest rises, with Toyota sales on track to jump 90 per cent from May 2011.
....

Detroit manufacturers are set to be led once again by Chrysler, predicted to post an above 30 per cent sales rise. Ford and General Motors are also expected to post increases following last month’s declines.

But analysts said other factors were also lifting demand and setting sales on course for a yearly pace above 14m for the fifth straight month. Estimates compiled by Bloomberg show a seasonally adjusted annualised sales rate of 14.45m cars this month, compared with 11.8m in May 2011.
...

Kelley Blue Book noted that car sales accounted for half of the 2.2 per cent annualised growth rate in the first quarter – a contrast with the normal pattern of demand in a recovery.

“At this point, it is almost as if the tail is wagging the dog,” said Alec Gutierrez, a senior market analyst. “During a typical post-recession recovery, we would expect to see auto sector gains being driven by broad economic growth. In the first quarter, the opposite was true, as auto sales were the primary driver behind GDP growth and have consistently been a bright spot in an otherwise slow-paced recovery.”


PlanMaestro

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Re: GM - General Motors
« Reply #9 on: May 25, 2012, 07:57:47 AM »
Investors drawn to subprime motor debt
http://www.ft.com/intl/cms/s/0/e19f58ee-a50e-11e1-b421-00144feabdc0.html#axzz1vdTZyhIt

Sales of subprime motor debt are climbing in a sign that one key area of the consumer credit market is recovering from the financial crisis with investors attracted by higher returns in the current low-yield environment. Sales of bonds that pool subprime motor loans, or those to borrowers that are not considered “prime” with the lowest risk of default, are running at more than $7bn so far in 2012 versus $12.4bn for all of 2011, according to data from Barclays.
....

Subprime motor debt losses during the financial crisis were far less than those suffered by investors in subprime mortgage debt. (...) According to data from Fitch Ratings, losses for subprime motor bonds peaked at 12-14 per cent of the collateral pool. That compared with losses of up to 50 per cent in pools of bundled subprime home loans.