If anything's certain in the world of investing, it's that no one will agree. After all, the whole concept of buying and selling shares revolves around two diametrically opposed views of the asset that's trading hands. So it should come as no surprise that Wall Street pundits can't agree whether GM's undervalued or overpriced.
One school of thought says that with Kirk Kerkorian?s recent interest in the stock, a recent reversal at the end of a long downward slide, and signs that the UAW is willing to negotiate, GM?s stock is undervalued. Optimists also see GM?s large cash holdings and large gross revenue as reasons the stock has some positive growth left in it. In fact, Prudent Speculator?s John Buckingham is upset that anyone sold to Kerkorian at $31/share, and thinks the stock might hit $44-$55/share (it closed today at $35.62).
On the other hand, yesterday?s news that GM demands for health-care concessions might trigger a UAW strike has some feeling decidedly negative about GM stock. Then there?s worries about the hundreds of billions in bond liabilities that GM will owe over the next few decades, and reasonable doubts that they will earn that much money over the same period of time. Robert Barry with Goldman Sachs stated ?General Motors? positive share price implies that reported pension and/or other post-retirement employee benefit liabilities will be cut dramatically over time, otherwise the stock price would be at zero. That makes recent strength in GM shares unwarranted.? In other words, if GM doesn?t renegotiate benefits or dramatically increase profitability (unlikely in the modern competitive market), they?ll eventually reach zero net worth.
So what?s an automotive enthusiast to do in such a tough situation? Simple - empty the mutual fund and use the money to buy a new Z06. Even though it?ll almost certainly depreciate in the short term, at least it provides some entertainment. Just kidding, of course. I?m too much of a coward to make a call one way or another. Let?s just say that I wouldn?t weight my investments towards GM, but that?s true of any single stock.