TheStreet.com's Jim Cramer says it's hated, but it's got the world's biggest share and several things that could go right for it.So somebody must be short GM (NYSE: GM) (Cramer's Take) and feeling the pain. Because no sooner did I mention on CNBC's "Stop Trading!" yesterday that you had to think about buying GM, guys were emailing me about how I was really going to hurt people now. I guess, vs. what I have already been doing!
First, you have to understand my life. When you say, "Take a look at GM" when you told people to sell it in the 40s, buy it back at $18, sell it again at $36 and buy it back at $27 as I did yesterday, I think I deserve the benefit of the doubt. But the angry emailers either had no idea that I had that good a record on this one OR they didn't care because I hurt their shorts.
Worse, they couch their pathetic pleadings in terms of how I am going to hurt "retail," which is Wall Street gibberish for the great unwashed, struggling to meet subprime loan-shark mortgages.
But let's remember what the recommendation is based on: GM will not be a union shop in a couple of years. Sure, the near-term is awful with slower sales, tough markets, breakdown of Delphi, etc.
But if you go out three years, which is something that some investors actually do, you can see a clear path of stabilized worldwide market share, better cars and lower costs, which is a recipe for a win. When you consider that the Fed will eventually have to cut rates more than they have because the mortgage market is falling apart, you might even get a faster catalyst.
What would I do? If you believe the potential of the story, you buy the common. If you want to get paid to wait, you buy the HPM preferred, which gives you about a 10% yield with a 25% kicker if the paper is called, which it will be if my thesis plays out.
Now, there is a morbid catalyst here. The big buyouts that have plagued GM with huge medical costs are from workers who retired 20 years ago. They are beginning to pass away in large numbers, and with them go the obligations. This company will have, I believe, among the lowest costs per car soon of any global player. If Chrysler can't pull off its nonsensical LBO -- oh, I forgot Cerebrus has all the capital in the world and nothing bad can ever happen there -- GM could grab some huge share.
In short, here's the real takeaway: I know there's risk to GM. But if you want to tell me that I am being reckless recommending this small-cap stock with the biggest share in the world, then I might as well just recommend that there's no real way to make money in the market, so you can forget about it.
Not my style.
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Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer had no positions in the stocks mentioned.
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Reader Comments (Page 1 of 1)
2-13-2008 @ 9:33AM
john said...
Cramer's nailed this call on GM. It will be even more true if GM comes on with plug-ins in a timely fashion and manages to negate the negative image on the west coast which is largely irrational and very thin. Once people see that the GM workforce is not only very talented and competitive, but that it's definitely NOT overpaid and lazy (anti-union bias), GM will soar. As with the market in general, I think all the bad news is in.JW
2-13-2008 @ 10:48AM
Mark Miksa said...
I can understand the argument for buying Gm but something bothers me. After so many years of negative experiences with car buyers of GM I'm noticing a swing away from American made cars. The perception is getting to the point many people are saying they will never buy American again. To me this is a huge lumbering beast that will take years for GM to try to overcome, myself included.Toyota is only 3,000 cars away from taking the crown away from GM. It seems GM is a lot riskier and will take more than 3 years to turn around.
2-13-2008 @ 6:41PM
Nickdago said...
GM is already turning around the perception people have of it with great cars like the Caddy CTS and Malibu as well as the saturn line. It also looks like they have a lot af great cars in the pipeling coming as well as electrics and hybrids. GM is already gaining share in Europe and China, and looks to have quite a bit of engineering spread out across the globe. Thier new interiors are getting raves from everyone and they definitley have some of the best looking cars and trucks available. So for all you Toyota and Honda buyers (probably the same people who complain about jobs being shipped overseas) you might want to start supporting an American company that actually has thier you know what together. PS - You would not catch me in one of the butt-ugly Toyotas, no matter how great some think they are. Also, have you ever hoticed how the Toyota and Honda designers always seem to copy the German and American auto makers, (ie Honda Ridgeline) It's getting to the point that you can not tell the difference between a Honda, Toyota or Nissan as it comes down the road.
3-02-2008 @ 11:00AM
cz said...
In January, 2004, on the Kudlow-Cramer show, Cramer laughed at a guest analyst who said GM, at 55/share, was going to 41 and, then it would be a good buy (see chart).
In addition, Cramer performed his 'I'm so smart and you're not' routine, said the stock was a screaming buy at 55, and further berated his guest by saying the only way GM will ever see 41/share again is when it trades in the 90's, then splits (see chart).
When GM was trading in the teens (Jan. to April, 2006) Cramer was touting the stock as 'the greatest short of all time', which he, naturally, called at the top. Then, he said GM was not worth considering until it traded near 10/share.
I guess I had no idea that he thought he had that good a record on this one (see chart).