1. General Motors Company (NYSE:GM)
Number of Hedge Fund Holders: 77
Ranking first on our list of the best electric car stocks to buy for 2022 is General Motors Company (NYSE:GM), an American multinational automobile manufacturer that is aiming to deliver 30 new electric vehicles worldwide by 2025. The flagship vehicles at General Motors Company (NYSE:GM) include Chevrolet, Buick, GMC, and Cadillac. General Motors Company (NYSE:GM) is expanding its operations into Michigan, investing over $3 billion in multiple EV projects in the region.
Publishing its third quarter earnings on October 28, General Motors Company (NYSE:GM) posted an EPS of $1.52, beating estimates by $0.55. Revenue for the period equaled $26.78 billion, missing estimates by $1.10 billion.
Daiwa analyst Jairam Nathan downgraded General Motors Company (NYSE:GM) to Neutral from Outperform with an unchanged price target of $65 on December 15, as part of a broader research note on the U.S. auto sector. He shifted his view on the US auto sector from Positive to Neutral, saying “there are risks in the horizon that could undermine valuations”. The risks include slowing growth in China, the transition to electric vehicles hurting margins and cash flow, a flattening yield curve, deteriorating consumer confidence, and uncertain vehicle buying conditions.
General Motors Company (NYSE:GM) is a popular stock among the smart money, with 77 funds in the third quarter being bullish on the company. Warren Buffett’s Berkshire Hathaway is the leading General Motors Company (NYSE:GM) stakeholder from the third quarter, with 60 million shares worth $3.16 billion.
Here is what Miller Value Partners has to say about General Motors Company (NYSE:GM) in its Q3 2021 investor letter:
“Another name we’ve recently purchased and have grown incredibly excited about: General Motors (GM). GM is interesting on many levels. We see it as an attractive investment opportunity and it might be a microcosm of current markets, both past and prospective.
Tesla trounced GM over the last decade. Tesla rose 15,797% crushing GM’s 238% increase, which lagged the S&P 500’s 365%. Tesla came out of nowhere creating what many said was the best car ever made. A decade ago, no one saw that coming, including GM. GM’s historical strength led to arrogance. It completely dismissed the threat of any newcomer.
Where are we now? Expectations are entirely different. Tesla’s current price embeds 18 years of growth while GM embeds under one year (see a pattern in what we like?!). Tesla’s expectations look even loftier when you consider that in that 18th year, Tesla would be projected to earn $1.35 trillion revenues at very high, Ferrari-type margins. The largest automakers today generate roughly $250 billion revenues at less than half those margins.
Tesla’s priced to go where no man (or woman!) has gone before. It’s impossible for Tesla to meet these expectations with auto manufacturing alone. It requires something more. Bulls believe Tesla can dominate an autonomous driving future and make significant money on software subscriptions. We don’t have a view on this other than that Tesla needs to do so to be attractive at the current price.
Market expectations for GM, on the other hand, are muted. There appears to be no innovation or growth priced into the stock. Yet GM plans to launch 30 EV (electric vehicles) models globally by 2025 (Tesla has launched a total of 4). GM’s new electric vehicles, like the Hummer and Cadillac Lyric, are extremely impressive. It’s revamping its manufacturing production to be modular, allowing greater speed and adaptability. The entire culture has transformed from a stodgy, bureaucratic old manufacturer to a speedier, more innovative software-enabled automaker. GM currently employs 25,000 software engineers.
GM believes it can double revenues by 2030, and improve margins through software and services. GM currently earns $2 billion of high margin software and services revenue, which is more than Tesla. Cruise, GM’s majority owned autonomous company, recently detailed why it sees the potential for $50B in revenues within 6-8 years of its 2023 launch of the Origin vehicle. BrightDrop, its autonomous commercial vehicle unit, looks promising as well with the potential for $10 billion in revenues. We don’t think this optionality is reflected in the current price. Investors started to see the potential after GM’s recently analyst day. We can easily get values for GM more than double its current price of $58.
The contrast between GM and Tesla illustrates what we see more broadly in the market, which is why we see more opportunity in classic value names than in the secular growth names. After a decade of dominance, expectations for innovative and disruptive companies are quite high. Many classic value companies were caught flat-footed, but have invested heavily to catch up. Muted expectations don’t reflect their improved prospects.”
You can also take a look at Billionaire Ken Griffin’s Portfolio: Top 10 Stock Picks and 10 Favorite Stocks of Cathie Wood and Ken Fisher.
