The Resurrection of General Motors
Mention the American auto industry and most people will still respond with pessimism about its future. Any time the majority takes a singular position with respect to business, my natural tendency as a value-oriented investor is to look closer. After all, when investors are optimists they have a habit of paying too much for assets. When pessimism exists, odds are good that you can find an attractive price.
While I've yet to invest in General Motors (GM), the shares sit trading at $20 a share and less than 8x earnings. And if you believe that the American auto companies are embarking on a slow resurrection of sorts, GM is an even more attractive opportunity than valuation ratios suggest. GM recently reported second-quarter earnings of $1.5 billion, or 90 cents a share. Profits declined 41% from the year-ago quarter. Unsurprisingly, the decline was a result of weak performance from Europe and South America. Yet even under this scenario GM made a tidy profit relative to its valuation....391 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
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