1. General Motors Company (NYSE:GM)
Number of Hedge Fund Holders: 77
General Motors Company (NYSE:GM) is an American multinational automaker that is committed to zero emissions, and is using its Ultium Platform to transform the automobile industry, bringing about an all-electric future. The Ultium Platform will enable General Motors Company (NYSE:GM) to realize its ambition of offering 30 new EVs globally by 2025. General Motors Company (NYSE:GM)’s product portfolio currently includes brands like Chevrolet, Buick, GMC, and Cadillac.
Warren Buffett’s Berkshire Hathaway is the largest General Motors Company (NYSE:GM) stakeholder as of the third quarter, holding 60 million shares of the company, worth $3.16 billion. Overall, 77 hedge funds were bullish on General Motors Company (NYSE:GM) in Q3, with total stakes valued at $6.41 billion.
General Motors Company (NYSE:GM) posted its Q3 earnings on October 27. EPS in the quarter equaled $1.52, beating estimates by $0.55. The $26.78 billion revenue missed analysts’ consensus estimates by $1.10 billion.
On November 15, Wedbush analyst Daniel Ives stated that the General Motors Company (NYSE:GM) EV transformation story heading into 2022 is starting to get recognized. The growing appetite among investors for new innovative EV stories, the vertical integration capabilities of General Motors Company (NYSE:GM), and conversion of its massive customer base to electric vehicles in the coming years represents a transformational opportunity for the company in the near future. The analyst has an Outperform rating and a price target of $85 on General Motors Company (NYSE:GM)’s shares.
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.”
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