GM a high risk, high return buy?

[laurence]

At these prices it seems like the market is almost betting on a GM bankruptcy. But the incoming administration and lawmakers seem to feel this can't happen, no matter what the cost. Is there more a risk the government will bail out GM in such a way to wipe out shareholder value or at least greatly dilute it, a la AIG?

[Hamlet]

I don't think GM has a viable business without going through a bankruptcy-like process to rid itself of some debt and bad union contracts.

Even if the government "bails them out", I doubt the equity holders will come out well.

The bonds may be a decent bet though.

[youbet]

Originally Posted by Hamlet

I don't think GM has a viable business without going through a bankruptcy-like process to rid itself of some debt and bad union contracts.

Even if the government "bails them out", I doubt the equity holders will come out well.

Agree on both counts. The equity holders should get their due. Assuming risk was part of the deal when they purchased the stock.

The bonds may be a decent bet though.

I was thinking that too and read an article about that on Yahoo Finance today. But..... I already have exposure to a ton of risky debt and equity positions, especially for a retired geezer! Otherwise..........

[kcowan]

The bond prices of both GM and GMAC indicate that the market does not believe they are a good risk.

[al_bundy]

more like a high risk no return buy

[chinaco]

I think the govt will bail out domestic car manufacturers. Bonds will be whole. Equity is a crap shoot.

IMO - I would steer clear. Instead of investing is a turnaround... invest is solid company that has been swept down with the market but will obviously survive.

[laurence]

It's always tempting to look at a really cheap stock for me. My "play money" account is only about 13k so Berkshire Hathaway is out of the running!

[al_bundy]

if you want a cheap stock look at NM, Nvidia, GIGM or any company sellilng for less than $10 a share that has EARNINGS. why buy a stock where the company need a government bailout just to survive?

just do a stock screen for >25% EPS growth, >10% revenue growth, <$10 a share, >18% ROE and you will find a lot of cheap companies you can buy

[clifp]

Negative 57 Billion is the current shareholder equity on the Balance sheet meaning the liabilities are worth 57 billion more than assets even including goodwill (which is virtually impossible to sell) even if Uncle Sam takes over GM's pension and health care cost the company the will still be worth less than zero. Or to put another away each shareholder of GM owes bond holders, and the UAW $100 a share.

I haven't extensively check GM debt, but I read that most of there long term debts is yielding 35%/year so that would be the high risk, high return way of speculating on GM.

FWIW, M* has the fair value of GM at .50, a buy recommendation at $.20 and a sell above $1.30

13K will get you 4 shares of Berkshire B shares during a dip.

[FinanceDude]

I wouldn't touch Ford, GM, or Chrysler's stock with a 10 foot pole today. You are all welcome to rub it in my face if you buy some and make a quick 200% on it, but I don't think Deutsche Bank was far off with a target of $0.........

[laurence]

Eh, now the bailout sounds like it will involve govt. equity stake, all right, sanity is returning. I'm just going to keep my 13k in VTV and quit trying to be smarter than I am.

[chinaco]

I would steer clear of the auto industry... all of it.

Of course, we all own it in our mutual funds.

[almost there]

Am buying F with "gambling" $$$. Ave in the 2's.
Will continue to add.
Will not fool with GM though.
Looks like its a goner......... Bail out or not.......

[FinanceDude]

Stay away from GM...........consider yourself "warned".........

[Nords]

Originally Posted by FinanceDude

Stay away from GM...........consider yourself "warned".........

Does "stay away" have a context of "based on my exhaustive studies of their annual reports and a rigorous analysis of their cashflow prospects" or does "consider yourself warned" come from the same people who were phoning Marc Cuban?

Next contestant on "Dancing With The Convicts"...

[Retire Soon]

Just want to thank everyone for their input. I've recently been considering a pure play on stock with some mad money by betting on GM and Ford and you guys talked some sense into my head. Well, I think I best look else where.

[al_bundy]

Originally Posted by al_bundy

if you want a cheap stock look at NM, Nvidia, GIGM or any company sellilng for less than $10 a share that has EARNINGS. why buy a stock where the company need a government bailout just to survive?

just do a stock screen for >25% EPS growth, >10% revenue growth, <$10 a share, >18% ROE and you will find a lot of cheap companies you can buy

maybe take NM off this list

[Dennis]

Been reading about buying some Options on it, as James Stewart discusses..

When more is known on it's progress of saving it, it just might be a Big bargin to put a few bucks in them ..

It's Stock price should skyrocket.. back to $10 or more?
picking upa fast 3-400%?

we'll see

"He who takes no chance, Has no Chance"

[FinanceDude]

Originally Posted by Nords

Does "stay away" have a context of "based on my exhaustive studies of their annual reports and a rigorous analysis of their cashflow prospects" or does "consider yourself warned" come from the same people who were phoning Marc Cuban?

Read my disclaimer, I think it's covered in there.........

Nords it's your money, just remember to put stop losses on the stock after you purchase it.......

[Nords]

Originally Posted by FinanceDude

Nords it's your money, just remember to put stop losses on the stock after you purchase it.......

Oh no, this reminds me too much of Ford at $6/share in 2002 or Chrysler in 1979. They all had their chances to fix their problems and they enthusiastically dug the hole deeper.

We've divested ourselves of our other individual stocks and our last one is Berkshire Hathaway. The rest of our ER portfolio is equity ETFs.

Buffett once pointed out that more money has been invested in the airlines than has ever been earned by the airlines. In another speech he held up a document that listed 70 pages of auto companies that have (formerly) existed over the last century.

I think the best thing for GM & Ford & Chrysler is... Chapter 11 Toyota.