How Is General Motors Company (GM) Like American International Group Inc (AIG)?

GM shares have rallied strongly despite the sale of the government stake. Shares moved from the $20 range into the upper-$30 range before sliding back to near $35 where they are today. With the share price increasing even as new shares enter the market, GM appears to have meaningful buying pressure behind it. If this buying continues after the government sale is finished, GM shares could see a pop similar to that of AIG as buying continues but supply stays the same.

Warrant investments
Investors looking to gain leverage on GM or AIG shares also have long-term warrants to consider. AIG warrants expire on Jan. 19, 2021, and carry a strike price of $45 per share. GM actually has three classes of warrants:

The warrants do carry additional risk, but they also offer more bullish investors greater exposure to these companies.

The bottom line
AIG and GM both share a common situation where the government sold or is selling its majority stake while the market keeps the publicly traded shares from falling. This signals buying pressure in the midst of the government share sale. American International Group Inc (NYSE:AIG) shares moved sharply higher after the government sale was completed, and General Motors Company (NYSE:GM) shares may do the same following the completion of its government sale. Investors looking to capture this pop could gradually accumulate shares. Those looking for greater exposure may want to take a look at the warrants as well.

The article How Is GM Like AIG? originally appeared on Fool.com and is written by Alexander MacLennan.

Alexander MacLennan has no position in any stocks mentioned. The Motley Fool recommends American International Group, Ford, and General Motors. The Motley Fool owns shares of American International Group and Ford and has the following options: long January 2014 $25 calls on American International Group.

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