As $GM continues to recall vehicles, should you hold on to the stock?
– there is still the US DOJ hanging over GM and the potential fine it could slap on could be big – Toyota was $1bn – but the problems were at the old GM not new, so legally the fine could be contested. Best is for the DOJ to fine GM $500mm and be done!
– the recalls could be hurting the brand
-the company has $28bn in CASH
-sales have not been affected so far and the cars produced today are of high quality
-China has big potential for GM – like Russians they love American Cars
-the stock is holding the $34 level – so this could be a floor – for now..
-The recalls are more cautionary to ensure the slate is wiped clean
Buffett still has 30mm shares and recently came non CNBC saying what a great job Barra is doing.
FV=45 for GM, Dividend yield = 3.5%. Hold (or buy at 34 if you you like GM)- target – $44, Stop $29 for 2:1 risk reward, 3.5% carry, 7x 2015 P/E!
Comparable: Ford FV=16.5 vs 15.75px, carry= 3%, 2015 P/E = 8x
2CentView has core position in $GM opened at 34.