Buffett, Einhorn Are Leading the GM Bull Charge
Thanks to a resurgence that includes topping its initial public offering price for the first time in two years, General Motors (NYSE:GM) has seen an increase in confidence from famed investors — Warren Buffett and David Einhorn included.
According to Bloomberg, Buffett’s Berkshire Hathaway (NYSE:BRK.A) purchased 10 million GM shares in the first quarter of last year and has added on to that total, holding 25 million shares through the fourth quarter. Einhorn’s Greenlight Capital reported a stake of 21.2 million shares.
“The product is a lot better than it used to be,” David Whiston, an equity analyst at Morningstar, told Bloomberg. “I see a lot of reasons to be bullish on GM right now.”
Whiston is far from the only analyst with this thought process. In a survey administered by Bloomberg, 79 percent rated GM as a buy, with the remaining 21 percent rating it a hold. Emmanuel Rosner, an analyst at Credit Agricole Securities, has the target price for GM at $40. Shares closed at $33.40 on Tuesday.
CEO Dan Akerson is eager to achieve some mid-decade goals, including stymieing losses in Europe and increasing sales in China from 2.84 million units to 5 million units. This comes after an announcement earlier this month that GM will invest $11 billion in China, primarily on factories and people.
Competitors Volkswagen and Ford (NYSE:F) also have their sights set on increasing market share in China, where GM currently holds the crown with 15 percent share. Volkswagen has announced plans to increase its units sold in China to 4 million by 2018, whereas Ford plans to double its output capacity to 1.3 million vehicles annually with a $600 million investment.
China is quickly becoming the hotbed for automotive companies, and GM is clearly in the best position to continue to dominate. The $11 billion investment will generate four new factories, which should help expedite the process by which broken down cars get back on the road. An added bonus for GM, Ford, and Volkswagen, is that Toyota (NYSE:TM) is sitting on the sideline in China, thanks to political tensions.
GM will likely be the optimal choice for high-profile investors for the foreseeable future.
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