This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

I Warned You About General Motors

The automakers never trade with the same valuation as the S&P 500 (^GSPC). So it's important to remember that the auto stocks are always cheap by this standard, and can always get cheaper. Valuation alone is not a reason to buy the stock. 

From the start, I have said that I am a buyer of GM between $30 and $32. The stock finally declined to that range on Friday. 

The reason I wasn't a buyer before was simple: the recall was likely to get worse before it got better.

That played out, and now that the company's first quarter earnings are expected to get drilled. 

Must Read: The Best Tax Day Freebies and Meal Deals

However, General Motors still faces two major headwinds: a settlement with the Justice Department and a possible compensation fund for victims. 

The settlement with the Justice Department is likely to be north of $1 billion. Many investors are comparing it to Toyota Motors' (TM - Get Report) similar "recall coverup," which recently resulted in a $1.2 billion settlement

General Motors' recent decision to retain Kenneth Feinberg, an attorney who specializes in orchestrating victim compensation funds -- such as settlements after the Boston bombings, the September 11 attack and BP's (BP - Get Report) oil spill -- demonstrates that the automaker is at least considering setting up some sort of fund. 

It's a difficult call. On one hand, I know and like many people who work at General Motors. 

On the other hand, the company has made dire mistakes that are going to cost it dearly. That spells trouble for the stock. 

GM stock is finally in my buying range. It sports a healthy dividend yield of 3.7%, has a low valuation and a strong auto market. Things could be worse, despite what it seems. 

Mostly, I'm waiting for that scared-money washout, where the stock rapidly sells off, finds a solid level of support and then rockets back higher -- all in one session. 

2 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
BP $33.58 0.27%
GM $31.80 -1.97%
TM $101.70 -1.22%
TSLA $240.76 -2.81%
AAPL $93.74 -1.15%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs