General Motors Earnings Update – AKA Mary Barra Is An Excellent CEO

GM

I’ve been singing Mary Barra’s praises for a long time now, here and on twitter. As CEO of General Motors, she has been doing such an excellent job and it’s funny that people have not been wising up to this for a long time. Maybe because she’s a woman and not as brash and loud as some other car company CEOs, or because she is at the head of General Motors which is kind of like the template car company which continues to just build cars, churn out profits and carry along like the fixture in the American business landscape it has been for years. Either way, she’s been quietly but ruthlessly executing at a very elite level.

And I have been buying GM stock. I was buying it since last year for my personal portfolio, but also allocated around 6% of the Investment Club’s funds into their stock. For a long time, the stock didn’t go anywhere and I continued to buy but it looks like the market is finally catching on as the company announced a blockbuster third quarter. The stock is up over 8% today, and based on the company guidelines, we can expect even more growth into 4th quarter.

The highlights of their business so far:

  1. Cruise, the company’s electric vehicle and automated driving division based in San Francisco made roughly $3.5bn in revenue, which is a record and proves that the company is serious in it’s goal to become a challenger to Elon Musk’s Tesla. This presents an enormous opportunity to use cost advantages from their huge balance sheet and traditional car business profits to gain a competitive edge in this new space. They announced several speed charging developments, autopilot partnerships and more with lots of progress to show. I’m excited to keep my eye on this.
  2. Strong sales in China and trucks and pickup sales in North America gave the company a sales increase of 6% to hit $36bn in the quarter. Keep in mind that the next quarter may see some issues in this area as the US China trade war escalates, and interest rate rises leads to slower auto sales in North America. Still, this blew all of Wall Streets earnings out of the water.
  3. GM believes that it’s full year earnings will hit almost $6 per share, which is way higher than what Wall Street forecasted, which means that the company’s momentum is on the increase, if they hit that number of course.

The company sees some headwinds in commodity prices this year affecting some of their costs, but also continues to project increased revenue and profits due to product mix tweaks and continued operational efficiency. There’s a lot more to the earnings report, I will still go back and dig through the filings later.

Meanwhile, today overall has been a great day for our portfolio, given that we’ve come off the worst monthly return period since 2012. Stocks today are up and my positions are up by a lot. Google, Xilinx, Paypal and more are all up 5%+ and GM and a few others are above 7-8%.

A welcome reprieve from the brutal pounding we’ve taken in the last few weeks, but it doesn’t matter because at the end of the day, we are investing for 30 years, not 30 days.

Everyone hears the key to success in investing is to buy low and sell high, but when stocks are low, everyone runs for the exits. Those who have the emotional calm , money, and presence of mind to keep buying when stocks are down are going to enjoy the biggest benefits in the long run.

Salute, and may the odds be in your favor.

-E

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