GM Stock

This Thursday (11/18/2010) GM returns to the market. After emerging from a government-organized bankruptcy (16 months ago), trying to improve their finances, and venturing into new products (like electric cars) GM feels like it is ready to once again be on top. According to the article, GM execs are trying to play up their bright spots, including: "a better lineup of cars and trucks, potential for global growth and a new cost structure that enables the company to make money even when the economy dips." However, the company has not fully "healed." The government is still heavily involved. In fact, the stock offering will only reduce the government's stake in GM from 61 percent to 43 percent. It can take years before the government has completely left GM. As the article says, "For shareholders, that means GM may not always put investors first. Political priorities may trump their demands. Some worry GM will spend too much time and use too many resources working on small cars or electric cars and not enough on profitable vehicle lines like trucks and SUVs." Plus, GM has made it known that it does not have full control over its finances. Its accounting procedures aren't where they should be. For instance, GM has included $30.2 billion in goodwill as an asset. Goodwill is an intangible asset and is not something that could be sold. It is also larger than other GM assets, like property ($18.1 billion) and cash ($26.8 billion).

With all of these issues (plus some more if you read both articles), logically GM does not seem like a good buy. However, logic doesn't always win out when it comes to the market. Plus, foreign investors seem very interested in GM. Chinese automaker SAIC, GM's partner in China, is finalizing plans to buy about a 1 percent stake. Also, funds which manage the finances of royal families and some nations, could invest $1 billion in GM. Overall, there seems to be quite a bit of risk in investing, but who knows, this might be something everyone overlooks, and then it just explodes (it has happened before). So, what are your thoughts; is GM something to take a careful look at or stay away from?

Sources:

http://www.chicagotribune.com/news/local/wire/chi-ap-us-gmipo-redflags,0,6379264.story?page=1

http://www.google.com/hostednews/ap/article/ALeqM5h3slmxJfh-ehG_A3Nf2276IQ0zzw?docId=acefdb2929504ccea71b2f692baff461

Seasonal Trading

With Holiday season kicking in, my partners and I decided to diversify our holdings. It was pretty evident that a colder time period (fall/winter) will drive coffee sales up. Though the idea started off with a simple hot chocolate at Caribou Coffee, I bought Caribou/Starbucks stock almost immediately after. The idea turned out to be a good one. Caribou Coffee has been going nowhere but up, and we sold Starbucks after making a slight profit. We are now looking to diversify to sub sectors for the Holiday sales. I personally, am looking into investing into big retailers that generally have a big impact on sales and have a positive outlook for the 2010 winter.

One stock we have had trouble with was VF Corporation, or as we nicknamed it 'The North Face Stock'. It had been in a downward spiral since we bought, assuming it would go up as the cold approached.

Do you have any ideas for stocks that will generally do better in the winter? It could be coffee, winter clothing, toy manufacturer/sellers, etc.