Shortly after I tweeted "Morgan Stanley replaces Ford with GM on best investment idea list as it upgrades N.A. auto sector" on Wednesday morning, I was boarding a flight when another person on the flight recognized me and took the opportunity to bash GM.
His argument, which I hear on a regular basis, is that GM is still a flawed company that will fail to deliver for investors. Once we boarded the flight and parted ways I thought to myself: two years after bankruptcy, GM still has to prove itself.
But here's the strange thing about GM's situation: most who track the company or work closely with it believe GM is primed to grow sales, profits, and its stock price.
Take a look at why Morgan Stanley put GM as its best idea (replacing Ford) in the auto sector.
Morgan Stanley pointed out GM is trading at a 4.5 P/E ratio with a strong balance sheet that packing in returns investors are not recognizing or perhaps even dismissing. And to top it off GM's new product cadence will pick up over the next couple of years, right as U.S. sales are expected to take off.
So how are GM executives reacting to the fact investors still aren't buying into their rebound from bankruptcy? By buying more shares of GM.
For the last two months GM executives and board members have steadily put their money where their jobs are. They clearly believe GM shares will rise from current levels and at some point in the future, they will profit.
So two years after bankruptcy, GM still has work to do to win over buyers and investors. The skeptics aren't going anywhere, at least not as long as GM shares aren't going anywhere.
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