Home » Behavioural Investing » General Motors Feds and UAW look to liquidate. Buy Sell or Hold $GM $F

General Motors Feds and UAW look to liquidate. Buy Sell or Hold $GM $F

Federal government is looking to sell some 30 million shares of General Motors (NYSE:GM). UAW Retiree Medical Benefits Trust will sell some 20 million. We all knew it was coming but apparently the market is surprised. The Federal government took a big risk and wants to cash out. Elections are coming and its time to get this sucker off the books. By the way the Federal Government could use the cash. Not sure for what but they always seem short.

Lets take a look at some of GM’s metrics and do a quick and dirty Buy, Sell or Hold.

  1. Stock is trading near its 52 week high. Range has been from $18.72 to $35.49. This would be the time to put it out.
  2. No dividend has been paid for all the obvious reasons. So if the dividend story starts to crank up that’s a plus.
  3. If the dividend story is not strong then we have a management signal about how strong the earnings are.
  4. The short position is some 8.95% of the float. If the stock weakens some shorts will cover and provide buying pressure. Hence the schizophrenic nature of short selling.
  5. RSI has been strong since mid April.
  6. Money Flow has been very positive since late Dec 2012.
  7. Momentum has been decidedly strong since mid April.
  8. Total amount under consideration is still less than the total short interest.
  9. The recent inclusion in the S&P 500 index means 85.4 million shares will be absorbed into index funds.
  10. Do you believe America is prepared to start buying cars? Little bit. Rising interest rates can snuff out the demand.

So on balance its a hold. Maybe write some call options. The next driver upward will need to be the reinstatement of the dividend. Obama will need to see this happen to prove his pro-market and economic savvy profile. to the extent that he cares about it. the stock is still highly politicized and will not always react to business metrics as other stocks will.

In the meantime Ford carries a 2.58% dividend yield, also trades near its 52 week high and is beholden to no one. the GM yield will need to be similar to Fords wink wink nudge nudge.

George Gutowski writes from a caveat emptor perspective. He also drives a Volvo S80 and is very happy.