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General Motors Just Warming Up

The following is an excerpt from Best Stocks for 2017: General Motors Company (GM) Is Just Warming Up

As we near the end of the third quarter, General Motors Company (GM) — my pick in InvestorPlace’s Best Stocks for 2017 contest — is putting up a respectable fight.

As I write this, the shares are up 12% year to date, 13% with dividends, which puts me in fifth place. That’s nothing to get excited about, but it does put me at even with the S&P 500.

I don’t like matching the market. I prefer to kick the market’s tail. And I expect that GM will do exactly that as we close out 2017.

To start, valuations are ridiculously low. GM and its peers are being priced as if the entire industry is at risk of imminently going out of business. GM is priced at 6.8 times expected 2017 earnings and 0.33 times annual sales.

Yes, auto sales are notoriously cyclical, and automakers often appear to be cheap when actually expensive (and vice versa) due to the wild variability in earnings. So, let’s smooth out some of that variability by doing a modification of the Shiller P/E, or the cyclically-adjusted price/earnings ratio (“CAPE”).

Doing a true Shiller P/E requires 10 years of data, and GM was reorganized only in 2010. Though Benjamin Graham, who invented the CAPE methodology decades before Robert Shiller looked at it, recommended using between five and 10 years’ worth of earnings data, so we’re fine here.

Using earnings data from 2010 to 2016, General Motors would have a modified CAPE of just over 10. The same figure for the S&P 500 is over 25.

Again, I would agree that GM deserves to trade at a discount to the broader market. But doesn’t a 60% discount seem a bit extreme?

To read the remainder of the article, see Best Stocks for 2017: General Motors Company (GM) Is Just Warming Up

 

 

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

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Best Stocks for 2017: GM Closing the Lead

Source: InvestorPlace Data as of 9/1/2017; Past performance is no guarantee of future results.

With four months left to go in 2017, my pick — General Motors (GM) — is at least putting up a respectable fight. When I last did an update two months ago, I was in 7th place with a measely 6% year-to-date return. I’ve now moved into 5th place with a slighly more respectable 10% year-to-date return.

Unfortunately, my competition hasn’t been standing still. Louis Navellier’s Nvidia (NVDA) has jumped another 7% and is not up 61% year to date. And Brett Owens’ CoreSite Realty (COR) rallied an additional 14% and is now up 53% for the year.

Winning this will be tough. I’d need for GM to enjoy a monster rally (which I do expect) and for Nvidia and CoreSite to both roll over and die (which I consider less likely).

We shall see. May the best stock win!

 

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

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General Motors (GM): STILL Have Some Catching Up to Do

Prices as of 7/31/2017, Source InvestorPlace

 

We’re now seven months into the contest, and I still have some catching up to do. My 6% year-to-date return in General Motors (GM) isn’t anything to be embarassed about… that is, until you see Albemarle (ALB), CoreSite Realty (COR) and Nvidia Corporation (NVDA) are all up well in excess of 30%.

We still have five months to go… and a lot can happen between now and December 31. General Motors has been pushing higher since mid-May, up about 10% in just two-and-half months. And remember, we’re getting paid handsomely to wait for this investment thesis to play out via the 4.3% dividend.

You can read my write-up on GM here: General Motors Company (GM) Stock’s Engine Is Still Purring

Disclosures: Long GM

 

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

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General Motors’ Engine Is Still Purring

Ealier this month, I wrote an update on my entry in InvestorPlace’s Best Stocks for 2017. The following is an excerpt:

I’m not particularly happy that GM’s engine is sputtering this year. But it’s important to remember that deep-value plays rarely work on the timeline you expect. It often takes time for the market to appreciate the value and award a suitable stock price…

Let’s dig deeper into General Motors’ woes. Auto sales have been particularly strong over the last couple years, leading most auto analysts to expect sales to be fairly weak this year. And thus far, that’s been the case. Just this week, GM announced that industry sales would be lower than originally thought.

But it’s not as if sales have completely fallen off a cliff. GM lowered its forecast from around 17.5 million to a little above 17 million. That’s not exactly crisis material.

Furthermore, GM stock wasn’t exactly priced for perfection. As I write this, the stock sells for an almost ridiculous 6 times expected 2017 earnings and 0.3 times sales. That’s not just cheap, that’s “going out of business” cheap. Investors are so skeptical that GM’s strong sales of the past few years are sustainable, they’ve effectively priced in a major blow-up…

When a stock is priced for perfection, it nearly always ends up disappointing. Something comes along and knocks the stock off its perch. But the exact opposite is true of stocks that have the absolute worst-case scenario priced in. If reality proved to be anything short of disaster, the stock will generally surge higher.

To read the full article, see Best Stocks for 2017: General Motors Company (GM) Stock’s Engine Is Still Purring

Disclosure: Long GM

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

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Best Stocks Recap: Energy Transfer Equity Still a Pipeline of Profits

The following is an excerpt of a piece originally posted on InvestorPlace. You can read the full article here.

It’s bad form to gloat. Apart from making you insufferable to be around at parties, you’re temping fate… and inviting a reversal of fortune.

That said, I’m going to risk it and toot my own horn here for a moment. I’ve had a good string of successes in InvestorPlace’s annual Best Stocks contest. I took the top prize in 2011, the very first year of the contest, when my pick – credit card behemoth Visa (V) – racked up a 34% return. I followed that up in 2012 with a strong performance by Turkish mobile operator Turkcell (TKC), just barely missing the top slot with a 37% return. And I reclaimed my crown in 2013 when German luxury automaker Daimler (DDAIF) rolled to victory with a 65% return.

Alas, you can’t win them all. My 2014 pick, South African mobile operator MTN Group (MTNOY) finished in last place, losing 6%. And my 2015 pick, business development company Prospect Capital (PSEC) finished in the middle of the pack, losing a modest 4%.

Well, in 2016, I got my groove back, winning InvestorPlace’s Best Stock for 2016 contest with a 55% return in Energy Transfer Equity (ETE). Over the six years of the contest, my picks have returned an average of 30%. Not too shabby. Taking the top spot in 3 out of 6 years and coming in a close second in a fourth… I’ll take that!

In 2017, I chose General Motors (GM), which is thus far off to a respectable start (see General Motors Will Roll to Victory). May the best stock win!

You can read the full article here.

Note: the returns reported here are reported by InvestorPlace for its annual Best Stocks contest and based on closing prices at year end. Results are not based on an actual traded portfolio but on the written recommendations of the contest participants. As always, past performance is no guarantee of future results.

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

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