In recent columns, I’ve discussed the troubles brewing at General Motors Corp. (NYSE.GM). If you don’t remember, let me recap. I believe GM has a very difficult road ahead of it. The world’s largest automaker is rapidly losing market share in the United States and could soon be overtaken by Japanese powerhouse Toyota Motor Corp. (NYSE/TM). Now that is a scary thought!
How can GM with all of its traditions fall victim to the Japanese, especially on its home turf? I truly believe success in the auto sector is all about innovation and reliability. GM, in my opinion, has not been innovative in its research and development. And, worst of all, its reliability is suspect.
The reality is consumers have become more quality conscious and are not interested in buying vehicles that will have higher than average maintenance costs down the road. That’s why more and more are buying Japanese, Swedish, and German vehicles. They are innovative and reliable.
But here is an interesting development. Did you notice the price action of GM stock versus its Japanese counterparts over the recent five-day period?
In a bout of active buying, GM stock has been rallying, appreciating a whopping 47.34% to over $36 from its recent low of $24.67 on April 19. Explain this to me? I must be missing something? Or perhaps I simply just missed out on what would have been an excellent trade.
During the same time period, Toyota’s stock declined 1.28% from $72.65 to $71.72. And Nissan Motor Co. Ltd. (NSANY) during the same period advanced a mere 0.08%.
It may be GM’s recent selloff created a wonderful buying opportunity. Was GM at $24.67 and then at $30 such a steal? Perhaps billionaire Kirk Kerkorian, who recently purchased 40.9 million shares of GM, knows something we don’t. Maybe it’s GM’s aggressive foray into the massive market in China that will save the company. Will this help offset declining sales at home? I’m not convinced the upward price trend is justified given the circumstances at GM.
So where am I going with this? As a trader, I would look at the comparative valuations of GM versus either Toyota or Nissan and say there’s something wrong with their respective charts.
I say the market is not behaving rationally. Perhaps we should sell GM and buy Toyota or Nissan. Makes an interesting trade, don’t you think? Just my humble opinion…