GM Is Sputtering Out

One year ago, only the boldest of contrarians would step up to buy shares of General Motors (GM Quote).

For those who bought, bold turned out to be beautiful in 2006. But next year, bold could get old.

Last December, GM's stock was hovering near 23-year lows. The company was gushing red ink while its management's credibility hit rock bottom. Meanwhile, the only momentum building in Detroit seemed to come from regulatory scrutiny surrounding GM's accounting practices.

With the U.S. auto industry in a state of inexorable decline, investors had all but left the world's largest automaker for bankrupt.

Now, with the luxury of hindsight, it's clear that all that negativity made GM a screaming buy. The stock ended up leading the Dow Jones Industrial Average in 2006 with a gain of 56%, and the performance stands as a lesson to those who pass up opportunities to buy cheap, beaten-down stocks in favor of Wall Street darlings headed for new highs.

That said, it doesn't mean GM is set for a repeat performance in 2007.

The stock is down about 20% since setting a 52-week high of $36.56 in late October. Without billionaire investor Kirk Kerkorian rattling his saber at GM, shareholders are left with Rick Wagoner, the company's CEO, who still boasts one of the weakest overall records of leadership in GM history.