Author Topic: GM - General Motors  (Read 631054 times)

JRM

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Re: GM - General Motors
« Reply #1680 on: May 23, 2019, 07:58:28 PM »
GM has bought back 15% of its shares since I've owned it; they should have bought back 25%.  My original investment thesis was spot on, yet the share price didn't respond accordingly.  Sometimes you're right but it doesn't matter and it's time to move on.


Ahab

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Re: GM - General Motors
« Reply #1681 on: May 23, 2019, 09:35:49 PM »
That's a fair point JRM. Sometimes Mr. Market is generous and other times Mr. Market is stingy, with GM it has been the latter of late. I'm considering building a position through LEAPS, but I sympathize with your view that this trade is taking far too long.

https://www.youtube.com/watch?v=KzKvH93A0Uc
^Interesting interview of Steve Eisman, in which he talks about GM for several minutes and discusses the potential for the stock to re-rate, in part due to its cheap valuation and in larger part because of improving market perceptions of Cruise Automation.
Long: FNMAT, FNMAN, FMCCL, FMCKO, BAC, JPM, GOOG, JD, MO/PM
Short: PCG, TSLA
Twitter: AhabValue

Spekulatius

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Re: GM - General Motors
« Reply #1682 on: May 24, 2019, 04:12:31 AM »
GM has bought back 15% of its shares since I've owned it; they should have bought back 25%.  My original investment thesis was spot on, yet the share price didn't respond accordingly.  Sometimes you're right but it doesn't matter and it's time to move on.

While in most sectors, the multiples have expanded, there are a few sectors, where multiples have compressed. Automobiles, auto suppliers, natural resources, energy, commercial real estate are sectors where multiples have compressed. Sometimes, it is not the managements fault.

Mr Market likes to hear stories right now and sometimes ignores solid cash flow. Maybe the above are value traps, but as long as cash is coming it, the jury is still out, imo.
Life is too short for cheap beer and wine.

ander

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Re: GM - General Motors
« Reply #1683 on: May 24, 2019, 06:31:04 AM »
My view on in it is that intrinsic value has continued to increase but the share price has lagged substantially. Re: the gap closing, share buybacks would help, but it is one of those things as previous posters have highlighted that there is a recency bias (people remember the nightmare from 2008 and the historical industry structure). Typically with these types of situations, they re-rate unexpected (maybe following a recession where GM weathers the storm well, or FCF continues to keep grinding higher, or share buybacks are done in size, etc.). I'm still holding my position and looking to likely increase position size on further weakness.

JRM

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Re: GM - General Motors
« Reply #1684 on: May 24, 2019, 09:09:23 AM »
Like I said, now is probably the time to buy since I hedged my position.  I'm optimistic on GM, but I'm having a hard time seeing the market re-rate GM before the next SAAR downturn.  I don't even think it takes a SAAR downturn, just a slow down of truck and SUV sales.  They won't continue to sell $50,000 trucks at the same rate forever. The low interest rate environment has pulled forward demand and allowed people who otherwise couldn't afford a $50k truck/SUV to be able to finance one. 

I agree GM is financially more sound now than when I originally invested, but it looks to me like there are also more ways to lose now. 

ajc

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Re: GM - General Motors
« Reply #1685 on: May 25, 2019, 08:14:21 AM »

Before folks on here get too bullish on GM or the auto sector, I suggest going as far back as you can on Daniel Ruiz's Twitter feed (https://twitter.com/DRuizG80) and reading what he's written.
He's been more right about auto stocks over the past five years than anyone else I'm aware of, and right now he's sending up multiple warning flares.
Even if you end up disagreeing completely, it's worth it for the contrarian take.
I say this as someone who did well in FCAU over the past few years (though I'm out now), so I've got no bone to pick.


« Last Edit: May 25, 2019, 08:16:40 AM by ajc »

ander

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Re: GM - General Motors
« Reply #1686 on: May 26, 2019, 10:42:41 AM »
ajc - I went to his website and read several posts. Thanks for flagging. The crux of his negative view seems to be that truck / suv sales might have gone up for a number of reasons but good chance that public sentiment switches back to cars just as the auto manufacturers are all starting to shift to truck / suv (i.e., at the wrong time). Is that correct?



Before folks on here get too bullish on GM or the auto sector, I suggest going as far back as you can on Daniel Ruiz's Twitter feed (https://twitter.com/DRuizG80) and reading what he's written.
He's been more right about auto stocks over the past five years than anyone else I'm aware of, and right now he's sending up multiple warning flares.
Even if you end up disagreeing completely, it's worth it for the contrarian take.
I say this as someone who did well in FCAU over the past few years (though I'm out now), so I've got no bone to pick.




sleepydragon

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Re: GM - General Motors
« Reply #1687 on: May 26, 2019, 11:26:28 AM »
ajc - I went to his website and read several posts. Thanks for flagging. The crux of his negative view seems to be that truck / suv sales might have gone up for a number of reasons but good chance that public sentiment switches back to cars just as the auto manufacturers are all starting to shift to truck / suv (i.e., at the wrong time). Is that correct?



Before folks on here get too bullish on GM or the auto sector, I suggest going as far back as you can on Daniel Ruiz's Twitter feed (https://twitter.com/DRuizG80) and reading what he's written.
He's been more right about auto stocks over the past five years than anyone else I'm aware of, and right now he's sending up multiple warning flares.
Even if you end up disagreeing completely, it's worth it for the contrarian take.
I say this as someone who did well in FCAU over the past few years (though I'm out now), so I've got no bone to pick.




That the winter is coming for car industry is basically the prominent view right now. Itís not new, unique insights.  Thatís why the entire industry PE is so low.

Pondside47

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Re: GM - General Motors
« Reply #1688 on: May 26, 2019, 11:34:55 AM »
ajc - I went to his website and read several posts. Thanks for flagging. The crux of his negative view seems to be that truck / suv sales might have gone up for a number of reasons but good chance that public sentiment switches back to cars just as the auto manufacturers are all starting to shift to truck / suv (i.e., at the wrong time). Is that correct?



Before folks on here get too bullish on GM or the auto sector, I suggest going as far back as you can on Daniel Ruiz's Twitter feed (https://twitter.com/DRuizG80) and reading what he's written.
He's been more right about auto stocks over the past five years than anyone else I'm aware of, and right now he's sending up multiple warning flares.
Even if you end up disagreeing completely, it's worth it for the contrarian take.
I say this as someone who did well in FCAU over the past few years (though I'm out now), so I've got no bone to pick.




I read a few pages of his report and felt he jumped to conclusion abruptly. He showed a few graphs of car sale/truck sale vs oil price and claimed there is a weak correlation between the two over time, without giving statistics. My take on the graphs he showed is that there's weak correlation except for the point where oil price gets really high. It was obvious from the graphs he showed that truck sale decreased when oil price hit new peak.

Then he said because there is a weak correlation, current low oil price doesn't guarantee consumer won't switch back to cars. Though he didn't talk about why people would switch back to cars. And then his conclusion is US auto OEMs are screwed especially FCA because of the reliance on trucks...

 

ajc

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Re: GM - General Motors
« Reply #1689 on: May 26, 2019, 12:57:02 PM »


ajc - I went to his website and read several posts. Thanks for flagging. The crux of his negative view seems to be that truck / suv sales might have gone up for a number of reasons but good chance that public sentiment switches back to cars just as the auto manufacturers are all starting to shift to truck / suv (i.e., at the wrong time). Is that correct?


Before folks on here get too bullish on GM or the auto sector, I suggest going as far back as you can on Daniel Ruiz's Twitter feed (https://twitter.com/DRuizG80) and reading what he's written.
He's been more right about auto stocks over the past five years than anyone else I'm aware of, and right now he's sending up multiple warning flares.
Even if you end up disagreeing completely, it's worth it for the contrarian take.
I say this as someone who did well in FCAU over the past few years (though I'm out now), so I've got no bone to pick.



Ander, I'm no expert on the sector so please keep that in mind. I think what Ruiz is saying is the Detroit Three have bet almost their entire ranches on big, expensive trucks and SUVs and that's where they earn their profits. If something causes consumers to not be able to afford those vehicles and be forced to buy smaller and more affordable foreign cars or vehicles from the used market, then GM, F, and FCAU will see their profit centers hit really hard.

The issue with that is there are a record number of Americans with car leases ending in 2019 and I believe Ruiz is saying that residual values already look bad, consumer credit strength has deteriorated, and auto loan defaults are rising.
This video he did from 2017 explains the process far better than I can - https://www.youtube.com/watch?v=PwoHxIvqXIk.

Basically, my understanding is there are so many cars coming off lease that used car prices are going to be depressed. That means the residual value of those cars won't be enough for already stretched American buyers to trade them in and buy expensive trucks or SUVs with, which is what GM, F, and FCAU badly need them to do.
Instead, those buyers will only be able to afford to buy cheaper foreign sedans or used vehicles. I think this is why he's saying the falling truck sales number is so important and why the US manufacturers zigged wrongly while the foreign ones zagged correctly.

I think this article about what Edmunds is saying around residual values is worth reading too - https://www.aftermarketnews.com/edmunds-record-number-of-americans-with-car-leases-ending-in-2019-will-face-significant-price-hikes/.
Again this isn't an area of expertise for me, but my understanding is that all the metrics he outlined in that video are now at record highs and not in a good way.