Is GM a buy at $21.25?
Only yesterday, I wrote that Kirk Kerkorian kept buying GM shares and those kept falling and falling. Now, while I did say that Kirk might indeed have some "legacy issues" (to put it mildly) with this name, I don't think Kirk is a fool either. Hence, I need to ask the question whether GM is a buy @ $21.25 (down 5% or so from yesterday's close). What does Kirk see here that we don't see to put himself under water by, oh, give or take, half-a-billion dollars at this point?
Is GM likely to go bankrupt? Uncertain, to say the least -- yesterday I did say it's a 50/50 case, but looking at the UAW situation, the fact that GM still has a bunch of cash and management is truly going to be literally scared into drastic action (Kirk might just make sure of that!), I can't in all honesty claim that GM is heading for bankruptcy, despite the obvious bad omens from the credit derivatives world. Could some foreign car manufacturer buy GM? Possible, but not likely at this point. Does GM have a valuable franchise? Arguably so, but they have made some wrong decisions lately. What's the story with the discounts for example? I can't fathom what GM management is thinking, even less so what Kirk might be thinking putting his money into this stock, which is beginning to look more and more like one of those old GM lemon cars that they used to make.
In summary, I would [reluctantly] still have to give the benefit of the doubt to the company's management and Kirk at this point, that they might indeed be able to turn around the situation. GM is not a Delphi-type of disaster quite yet, and I do think the UAW (especially after Delphi) is actually going to play ball, when it comes to saving this company, for the longer-term. How long-term, you say? What I said about Kirk yesterday remains valid -- even if he is eventually right, I hope he is around to see his "success". Buying longer-term 115%-120% leaps (GM Jun07 25 calls for example), if one is bullish, would be my only intelligent advice at this point -- and that only for investors who are definitely not of the faint-hearted type. It will be a bumpy ride, even if the story works.
Is GM likely to go bankrupt? Uncertain, to say the least -- yesterday I did say it's a 50/50 case, but looking at the UAW situation, the fact that GM still has a bunch of cash and management is truly going to be literally scared into drastic action (Kirk might just make sure of that!), I can't in all honesty claim that GM is heading for bankruptcy, despite the obvious bad omens from the credit derivatives world. Could some foreign car manufacturer buy GM? Possible, but not likely at this point. Does GM have a valuable franchise? Arguably so, but they have made some wrong decisions lately. What's the story with the discounts for example? I can't fathom what GM management is thinking, even less so what Kirk might be thinking putting his money into this stock, which is beginning to look more and more like one of those old GM lemon cars that they used to make.
In summary, I would [reluctantly] still have to give the benefit of the doubt to the company's management and Kirk at this point, that they might indeed be able to turn around the situation. GM is not a Delphi-type of disaster quite yet, and I do think the UAW (especially after Delphi) is actually going to play ball, when it comes to saving this company, for the longer-term. How long-term, you say? What I said about Kirk yesterday remains valid -- even if he is eventually right, I hope he is around to see his "success". Buying longer-term 115%-120% leaps (GM Jun07 25 calls for example), if one is bullish, would be my only intelligent advice at this point -- and that only for investors who are definitely not of the faint-hearted type. It will be a bumpy ride, even if the story works.
posted by Ivan at 11/16/2005 12:52:00 PM
1 Comments:
it is catching a falling knife which we know you like to do, but GM has only been lower in the 87 crash, so...
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