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While the market is buzzing about the Tesla (NASDAQ:TSLA) 5-for-1 stock split, there may be a much better bargain in the automotive sector. I’m referring to old American stand-by General Motors (NYSE:GM). It’s true that GM stock has struggled in 2020, but a turnaround could be in the offing.
Granted, General Motors isn’t as flashy or as newsworthy as Tesla and other hot carmakers. On the other hand, contrarians should appreciate GM stock’s value proposition. Indeed, the fact that GM shares are still low-priced is what makes this investment so appealing.
Yet, there’s more to the story than a reasonable price tag. General Motors is quietly making inroads into future-facing ventures. You won’t get the fanfare like you see with Tesla, but “slow and steady wins the race” investors can take a position in GM stock for gradual gains.
A Closer Look at GM Stock
Admittedly, GM stock does not offer a dividend at the current time. So, income-focused investors might take issue with that.
However, value seekers should like GM’s trailing 12-month price-to-earnings ratio. At 28.01, it is quite reasonable. (For comparison’s sake, Tesla stock’s trailing 12-month price-to-earnings ratio is a whopping 1,290.98.)
GM stock was comfortably sitting between $34 and $35 prior to the onset of the novel coronavirus. Moreover, this stock has traded above the $40 level on numerous occasions in the past. It’s not inconceivable that the bulls can bring the share price back to those levels at some point.
For the time being, the bulls’ primary objective should be to reclaim the crucial $30 level on heavy trading volume. Just as importantly, they need to keep GM stock above $30 in order to prove that they’re in control of the price action.
GM Stock and the All-Electric Future
Back in March, General Motors CEO Mary Barra declared her company’s intention to “transform product development at GM and position our company for an all-electric future.” That certainly sounds like General Motors is ready and willing to take on Tesla directly.
We’re now seeing the signs of General Motors’ progress in this area. Reportedly, the Corvette Engineering team at General Motors is being moved out of the Global Products Programs segment and into the Autonomous and Electric Vehicles segment.
Does this mean that we’ll see an all-electric Corvette on the roads tomorrow or next week? Don’t count on that. What matters here is that General Motors is pivoting towards an emphasis on electric vehicles, slowly but surely.
Don’t Forget the Ventilator Trade
I’ve spoken about the “ventilator trade” since the early stages of the Covid-19 crisis. When an arm of the government is a major client, then that’s a good sign for practically any investment.
In the battle against the coronavirus pandemic, General Motors and its collaborator, Ventec Life Systems, have already supplied 30,000 V+Pro critical-care ventilators to the Department of Health and Human Services.
This was a highly efficient operation, with the two companies fulfilling the 30,000-ventilator order in a mere 154 days. Amazingly, it’s been estimated that they made one ventilator every seven minutes or so.
Barra proudly commented on this achievement, saying, “Our drive to put critical care ventilators into production was fueled by thousands of people at GM, Ventec and our suppliers who all wanted to do their part to help save lives during the pandemic.”
The Bottom Line
General Motors is shifting, and investors are invited to participate in the company’s growth into new areas. This doesn’t mean that GM stock will explode like Tesla stock did, but steady returns can build wealth just like a sudden windfall can.