Here's Why Warren Buffett's General Motors Bet Makes Sense - TheStreet

NEW YORK (TheStreet) -- No one is too surprised to learn about Warren Buffett's investments in Wells Fargo (WFC) - Get Report or Coca-Cola (KO) - Get Report . But General Motors (GM) - Get Report ? But according to TheStreet's Jack Mohr, GM may be a different story for those following the Oracle from Omaha. 

The automaker has been roiled by the continuing ignition switch scandal, which ultimately sparked a recall spree involving more than 30 million vehicles. The result has led to billions of dollars in costs and even a few trips to Capitol Hill for CEO Mary Barra. 


General Motors GM data by YCharts

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But Mohr said on TheStreet TV that the biggest unknown cost continues to loom -- an expected fine of between $1 billion and $2 billion from the U.S. Department of Justice. 

But it doesn't matter, Mohr said. Here's what must interest Buffett: General Motors has $28 billion in cash on its balance sheet. The company also generates $6 billion in annual cash flow. 

GM's financial position has never been stronger, Mohr said, and with capacity utilization above 90% and growing market share, the stock looks relatively attractive. In fact, without the automaker's recall issues, shares could be as much as 50% higher from current levels.

For the most part, the risks have played out and the stock's  downside is now limited, while the upside has plenty of room, Mohr said. So investors should take advantage of the recently weak price action to get long on General Motors now.

-- Written by Bret Kenwell

Follow @BretKenwell

TheStreet Ratings team rates GENERAL MOTORS CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate GENERAL MOTORS CO (GM) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

You can view the full analysis from the report here: GM Ratings Report