Profits Up, Stock Still Low
While its stock slumped in 2011, General Motors racked up its most profitable year ever, earning more than $7 billion. So far in 2012, GM is on track to come close to that level of profitability. Still, the stock is nowhere close to approaching $30, let alone the IPO price of $33 a share.
Some of it is due to the fact most auto stocks have stalled as the European auto market has imploded. Some of it is also due to the overhang linked to the U.S. Government still owning 500 million shares (25% of the outstanding stock) of GM. Many investors believe GM shares will remain under pressure as long as the Treasury Department has a big stake in the automaker.
(Read More: Why Chrysler's Makeover Is Far From Finished)
Is the concern legitimate? Depends on your view. I've talked with more than a few veteran auto analysts who think GM shares should move higher strictly on fundamentals. At the same time, they point out GM is not seen as a typical stock, mainly because of the government stake.
Is 2013 when GM Shares Finally Soar?
As GM wraps up 2012, its stock is up 16% year-to-date. Those returns aren't setting the world on fire, but they are encouraging for GM shareholders. More importantly, there are people on Wall Street talking about GM shares finally climbing above $30 a share in 2013.
Is it a slam dunk? No way. GM's European operations will continue to be a drag, even as the company takes steps to curb losses. Here in the U.S., the launch of a new line of pick-up trucks is critical to sustaining GM's market share and boosting not only profits, but profit margins. And who knows whether 2013 is the year the U.S. starts to unwind its position.
(Read More: GM Tops October Sales Estimates, Others Disappoint)
What intrigues me the most about GM shares two years after the IPO is how emotional people remain about the automaker. Just look at how the automaker was front and center during the presidential campaign. Two years ago I thought the "anti GM" sentiment would dissipate if the automaker got back in the black and was delivering steady profits. That's happened, but in many respects GM is still looking for love.
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