Categorized | Auto, Investing

Is it time to invest in General Motors?


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Amid the ever mounting recalls made by General Motors, the congressional hearings, the lawsuits against the company and the government fines, some are wondering if it is time to invest in General Motors. A list compiled by Gold Sachs has listed General Motors as one of the fifteen top stocks for investors to buy shares for as the company shows in the eyes of Goldman Sachs “the best growth, value, and yield” over other companies. So the question that has now surfaced: is it time to invest in General Motors?

Various Recallsgeneral motors 2

General Motors has suffered some reputation hits that have not only been the subject of debate within the eyes of the public, but TV comedians have attacked the company via satire as well. General Motors has recalled over 20 million vehicles this year alone, which has dwarfed the sales of the company over the last five years. The recalls have effected over two decades worth of vehicles both old and brand new. Issues with faulty switches, lack of fire shielding, and lack of airbag deployment have plagued the company’s various brands.

In May, General Motors paid a fine of 35 million dollars to resolve a federal investigation. The company is also facing a plethora of private lawsuits including a class action lawsuit in California that could end up costing General Motors up to 10 billion dollars. The sheer amount of recalled vehicles made by General Motors may be one of the largest recalls in the automotive history but the current results for the company are also staggering as well. The very fact that the company is making a better profit amid the mounting recalls puzzles many industry analysts. Even the some of the leadership of General Motors has voiced confusion over the current trend that is bringing in new profit with more solid sales numbers.

Stock Price

The current cost of one share of General Motors closed yesterday at $36.58. At an all time low the shares of General Motors were trading at 32 dollars per share, yet in January of 2014 stocks were being traded at 41 dollars per share. While the shares have regained some ground in the stock market, they are still down 10% over last year. Many would look at the continual plummeting of share prices with some concern, but Goldman Sachs said that part of the reason that General Motors stock is so attractive because it is on sale. Essentially because the company has a strong heritage of growth and financial success, despite this temporary setback due to recalls the company has been showing some very positive sales numbers. Current company earnings are expected to fall later in the year due to the payoff of the various fines levied against the company because of the recalls as well as the cost of repairing the defects that plague many of General Motors various brands.

Industry analysts believe that General Motors profits project an increase of upwards of 50 percent by 2015 over 2014’s sales numbers. Current shareholders are paid out in one of the industry’s best dividend payouts, which Goldman Sachs thinks is one of the more attractive incentives for investors to look at when thinking about investing in General Motors stocks. The current lower price per share has given what Goldman Sachs would refer to as a sales price that will only grow in time. The bank believes that the projected growth will return the stock prices to their former glory if not higher than their former glory, allowing investors to reap the rewards in the process of their initial investment.

The Goldman Sachs Listgeneral motors

Other than General Motors, the list contained another 14 companies that were also rated as some of the best companies for investors to look at when investing. Just in case you were wondering what those companies were (not in any specific order):

1. Whirlpool
2. Ford
3. Lowe’s
4. Gamestop
5. Dow Chemical
6. International Paper
7. Freeport McMoran
8. Avery Dennison
9. Nucor
10. Principle Financial Group
11. Stanley Black and Decker
12. Aetna
13. Eaton Corporation
14. Corning

Goldman Sachs has buy rating on all of the above mentioned stocks, but notes that General Motors stock in particular has a dividend yield of 3.3 percent while the dividend for S&P 500 is only at 1.87 percent. That being said the bank believes that General Motors is a solid and sound bet when it comes to investors who are looking to grow their investments long term for more residual income. While the recalls have definitely hampered how the public views the auto manufacturer as far as a company lacking safety, their profit projections and current increased profit margins haven’t mirrored the results of a brand in more traditional circumstances. Goldman Sachs may be right in this case when it comes to investing in General Motors, the time may be now.

 

 

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