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Varchild2008 (83.77)

Why did this ALL STAR outperform General Motors (GM)?



May 06, 2009 – Comments (9) | RELATED TICKERS: GM , SKX , BAC

Simple answer...General Motors won't head into bankruptcy.  My confidence in that is around 85%.
It is based on the following press releases that have come out in recent days since my Outperform pick (which I plan to keep all the way to the June 1st deadline and if I am right...beyond).

1)  Russia, not just Italy's FIAT want's a piece of GM's assets in their OPEL name brand.

2)  New news surfaces that China's Gyaat is interested in GM's SAAB name brand.

3)  Over the radio news, I learned that GM's dealerships want to get together and buy the Pontiac Name Brand.

Put all that together and a successfull (hopefully) meeting full of compromises and concessions with the UAW workers and you got a plan that could nullify the need to file for Bankruptcy.

Any presser that comes out and states, "GM No longer has to file for bankruptcy" will send the stock to at least $5.00 a share.  Not right away though as GM needs to explain away their short-term plans for producing a competitive strategy with their 4 brands... They need to make it clear to the shareholders whether or not they can be profitable by 2011 or at least 2012, along with a coherrant business model spelled out that investors can believe in and rally behind.

I think all that and more will fall into place by the end of this month, or the end of the beginning week of June.  Believe me..A lot of people will be kicking themselves that they did not have the GUTS to buy any shares of GM when and IF (BIG IF) this happens.

Like I said.... I can't say 100% to anything.. My Outperform on GM remains a high risk green thumb.

But look at my track record of outperforming high risk OMG stocks just as they skyrocket (recently):

1)  COT
2) AXL
3) F
4) C
5) BAC     <----Despite stress test spook scares and recapitalization scares I stood behind my outperform.
6) WHR    <---- Despite Motley Fool continuously giving this 2 stars out of 5....
7) SKX     <-----  My call on Skechers was a HUGE call based on real shopping experiences.

Let's face it.  We are in a Bull Market where even the improbable becomes probable.  So, even with Chrysler in Bankruptcy Court and all signs point to Bankruptcy for GM.....  Anything is possible.

But even still... Even given these insane Outperform risk picks I've been doing to build CAPS points to now over 3,000....  I don't make them lightly.

9 Comments – Post Your Own

#1) On May 06, 2009 at 5:54 PM, bigpeach (31.05) wrote:

You realize a 100-1 dilution seems likely now right?

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#2) On May 06, 2009 at 6:08 PM, BravoBevo (99.97) wrote:

Var:  I appreciate your thoughts. However, at this time I do not agree with your sentiments. Recently, GM began floating a proposal to have a 100:1 reverse stock split, which would happen in conjunction with or shortly after the issuance of those billions of shares that GM intends to cram down on existing debtholders.  If everything goes as GM managment and BO intends, then your 100 shares of GM stock (closed today at $1.66/share) would convert to 1 share worth $166.00.  You and I know that the value is the same; however, with very rare exceptions reverse splits commonly trade lower for a significant period of time well after the split occurs.  Therefore, whether or not a GM bankrupty is inevitable (and I personally think it will more likely happen), I respectfully must disagree with your ultimate prognosis. 

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#3) On May 06, 2009 at 6:17 PM, JakilaTheHun (99.92) wrote:

I disagree with your assessment since GM is planning to dilute the hell out of their stock and do a reverse-split, but I gave you a rec anyway for making some good arguments. 

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#4) On May 06, 2009 at 6:20 PM, FastTradinOutlaw (< 20) wrote:

gm makes only ugly cars that are tedious to use. 

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#5) On May 06, 2009 at 6:20 PM, bridgeboy0 (29.01) wrote:

The plan that I read about has the existing shareholders (you know the ones who currently have 100% of the stake in GM) will have 1% of the ownership if (big IF) they can negotiate their way with UAW and existing bondholders to avoid bankruptcy. 

So either they end up in bankruptcy and the stock is worthless.  Or they make a deal where each of the existing shareholders get 1/100th of what they have now.  You think this is a good time to buy, prior to this dilution/bankruptcy?  Really??

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#6) On May 06, 2009 at 6:36 PM, bigpeach (31.05) wrote:

The plan is to issue 60 billion new shares to bond holders, converting their debt to equity. This is estimated to leave the existing shares as only 1% of the company. Then they plan on the 100:1 reverse stock split so that they don't have stock trading for $0.016. Talk about a penny stock. If CAPS is scored correctly, you would need to turn $0.016 into $5.

Just trying to clear up any misconceptions.

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#7) On May 06, 2009 at 6:58 PM, finabuddy (84.12) wrote:

This is all pretty uncharted. There is a lot of undue influence, primarily from the the white house, on auto companies. Its hard to believe there is any value in the common stock, but if you think there is, go for it.

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#8) On May 06, 2009 at 9:08 PM, ChrisGraley (28.63) wrote:

I just red thumbed the stock today. If you can just look at the scores of the posters above me and you might see that the all stars actually have a different opinion. If you have already green thumbed it, I wish you luck. You have technically started 99% down, but the government could still wind up making this a good investment for you.

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#9) On May 08, 2009 at 4:07 PM, Varchild2008 (83.77) wrote:

Not worried about the 100:1 reverse stock split.

Because of the 100:1 reverse stock split.

Of course it is not even a done deal as to whether or not GM does dillute massively their share count to bail themselves out of Bankruptcy Court.. I mean to avoid it.. It's not in the cards..

And when the reverse split happens the share count totals will essentially be the same as they are today... Making the share dillution scares seem the long term.

I'll pull my Outperform rating if there's enough absolute-ness in regards to GM and Bankruptcy Court.  For any good it will do the stock price seems stable for now above $1.50 a share..thus at least allowing it to remain on Motley Fool's website.

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