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TheStreet Open House

Jim Cramer and Kyle Bass Like GM, and So Should You

NEW YORK (TheStreet) -- General Motors' (GM) stock is up 34% year to date.

With the government planning to sell its remaining stake by the end of the year, the epithet "Government Motors" will no longer apply, leaving GM free to pay executives what it wants to.

Jim Cramer likes GM and so do I.

And GM has just received another notable vote of confidence: Hedge fund manager Kyle Bass' Hayman Capital Management, recently put money in GM stock, predicting that as much as $2 billion could go to dividends next year. GM has about 1.39 billion shares outstanding. 

For the first nine months of the year, GM had about $4.3 billion in net income, and once the government's remaining 31.1 million shares are sold, it might easily afford a dividend. Ford (F) already carries a 2.4% yield, and its stock is up 28% for the year.

What's powering GM forward is energy. Fracking has created a glut in natural gas and oil prices below those in the rest of the world. With coal dirt cheap, coking and steelmaking are also at an advantage. It's a good time to make more stuff here.

Bears may point to the re-branding of Chevrolet as Opel and Vauxhall in Europe, but that is more of a marketing story than a financial story. With demand slowing in Europe and pointing toward upscale brands, the move makes sense because Opel is seen as a luxury brand.

GM, meanwhile, is doing well in the U.S. In November alone, it sold about 212,000 cars and trucks here, up 14% from a year ago. There were big gains in big-profit trucks such as the GM Tahoe and Sierra, both up over 20%. Sales of the GM Acadia, a crossover SUV built on a mid-size car platform, doubled, and it looks like the next big category.

Even the bad news can be spun as good news.

Is Korea production down? That demand can be served by lower-cost plants.

Is Japan lagging? We're talking here about just 1,000 cars, and it's a great opportunity for fuel-efficient luxury cars such as Cadillacs imported from Detroit.

If GM traded in line with its peers, based on earnings before interest, taxes, depreciation and amortization, it might be worth nearly three times more than it is now. The stock even trails Ford by this measure, and the more bullish analysts say GM should fetch a premium, given its strength at the high end of the market.

All this success gives GM plenty of room to maneuver. The latest news is that it's selling its remaining stake in Ally Financial, the auto lender once named GMAC when it was GM's financing unit. GM still owns some former parts of Ally's international operations, which it bought last year, making them part of GM Financial, its new lending unit.

There have been hard lessons learned along the way. GM got lazy, what's now Ally got lost in the mortgage mess, and the government is going to lose money on the bailout.

But you don't invest based on the past, you invest based on the future, and with low energy prices as a tailwind, and high-profit cars selling well, GM is free to fly.

At the time of publication the author owned no shares in companies mentioned in this article.  

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

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