We are finally seeing signs of life in this critical U.S.
industry. Rocked by overspending, hubris and economic crisis, this
once mighty segment of theeconomy was reduced to a mere shadow of
Fortunately, things are quickly changing for the better in this
nearly left-for-dead sector.
In fact, January 2013 was the industry's best January since
2008. U.S. sales soared 14% to more than 1 million units compared
with the year-ago period, while individual companies reported
between 16-27% sales gains during the same period. Total unit sales
hit more than 15 million in the first month of the year, signalling
an even better year than 2012, granted sales continue on this
The surgingstock market , with the S&P 500 posting its
top-performing January in more than 12 years, combined with a
slow-but-steady improvement in the U.S. employment picture have
fuelled the rebound. Clearly, this industry rises and falls in lock
step with the U.S. economy, so it's often viewed as aproxy for the
entire domestic economy.
In case you haven't guessed it yet, I am talking about the auto
With this kind of growth potential in mind, one company stands
out for its leading 19% U.S.market share --
General Motors (
Let's drill down into the company's most pertinent facts and
figures to determine whether aninvestment makes sense.
Just behind GM is
, which has a 16% market share, and
Toyota Motor Corp. (
, with a little more than a 15% share of the U.S. market, which
shows that GM has been through quite the rollercoaster ride in the
past five years. This includes aChapter 11 reorganization in 2009
and an incredible comeback about two years later, when it reported
recordearnings of $7.6 billion, or $4.58 a share, just two years
The 2012annual report is set to come out on Thursday, Feb. 14,
and it looks like 2013 is on the right track to set another record
for the company.
"Looking at what we are going to make from a financial
standpoint as we close the year, I think we have done a great job
in North America," Mark Reuss, General Motor's North American
president, said when the company reported monthly sales last
GM'sprofit centers are in North America and China, with
projected adjusted earnings of a little more than $1 billion for
2012, while Europe has been posting losses. The European losses are
projected to be as much as $600 million in the last quarter of
2012. GM has responded by cutting costs and introducing new models,
but supply still outstrips demand.
It's important to remember that General Motors took on the
moniker "Government Motors" because of its 2009bankruptcy and
government bailout. The government still owns nearly 20% of the
company's stock even after GM bought back 200 millionshares in
Looking at the technical picture, shares are off their early
January highs of just above $30, but are holding solidly above the
50- and 200-day simple moving averages. There is a solid uptrend
evident in the 50-day simplemoving average . The 200-day average
has started to turn upward.
Risks to Consider:
Things are improving economically and the government still
supports a portion of General Motors. However, buyingstocks in
anticipation of earnings can be very risky. In addition, a bet on
GM is a bet on the U.S. economy. Should the economy fall back into
the doldrums, GM is sure to follow.
Action to Take -- >
This stock is appealing now, on the eve of its earnings report.
Despite all the high expectations for record numbers, the stock
price has not reacted yet. Should the anticipation be correct,
shares would react favorably to positive numbers on Feb
Don't wait until the stock moves higher when the company
releases -- and meets -- its earnings expectations as I thinkwill
be the case. Now is a good time to establish a position. Entering
now, with stops at $27 and a $50, 18-month target price makes solid
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