Barron's: GM Shares to Triple
You might think that Barron’s would ease-up on the “bet on GM” advice. In a June 2 cover story, Barron’s told its readers to buy shares in the ailing automaker. At the time, The General’s stock traded at $17.10. “GM’s turnaround will accelerate over the next two to three years, even if the U.S. cyclical downturn dims the outlook for the next 12 months,” Barron’s prophesied. “The shares could rise to at least 30 and maybe as much as 45 once those big cost reductions drop to the bottom line in 2010. And if the stars align perfectly — the economy enjoys a second-half uptick and the housing market and consumer confidence turn for the better sooner than expected — the stock’s rebound could be quicker. Even a small improvement in sentiment could bring a disproportionate rise in the stock.” To be fair, in November, when the excrement and air movement device had already collided (but good), Barron’s did the mea culpa thing: “Our enthusiasm for GM was clearly wrong, as was a suggestion that its bonds, like the senior note maturing July 15, 2041, would be more valuable.” And now, Ward’s Auto reports “GM restructuring may make bonds best bet-Barron’s.” There’s more, but we’re not subscribers– to either publication. At close of play Friday, GM’s stock traded at $4.49 a share– and that’s AFTER the bailout.
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It looks like the same old story to me. They are trying to tell us that polished language and seemingly straight logic make a case. Their argument is totally unblemished by the empirics that say the same guys were often wrong in the past, and that you can't make a reliable prediction about equity prices anyway. Why does anybody listen to them? I used to say: people like Barron's talk like this because they can. They're betting on a rising tide lifting their boat, sooner or later. They lose nothing when they make wrong predictions, but win revenue when their institutional clients are happy. But that whole farcical game has changed. At one point one asks: have these guys no shame?
Meanwhile, Reuters reports that Credit Suisse's auto analyst thinks GM shares might be worth as much as a dollar in the coming months.
Well, yes. They're in the toilet now. Unless the company completely dissolves, there's no other way they can go. Of course, this is GM. Supposedly they had enough cash to make it through 2009. That tells me that their financial statements are only good for toilet paper, and that stock might suffer a similar fate.