Elon Musk is a brilliant guy and Tesla (TSLA) makes a beautiful product. And electric vehicles (EVs) are the trend of the future, suggests Mark Skousen, editor of Home Run Trader.
However, Tesla is a momentum stock that is selling at 1,200 times earnings and 35 times book value. After its run-up over the last 52 weeks, Tesla isn’t just bigger than most of the world’s other major car companies combined — it is now the sixth-largest company in the nation, based on market cap.
There’s no doubt that Tesla has been a home run. And we’ve profited heavily from Tesla in Forecasts & Strategies and two of my other trading services, Fast Money Alert and TNT Trader.
But, as the investor at bat, your goal is to hit the next one. And you have a much better chance of doing that with the country’s second-largest auto manufacturer — General Motors (GM).
GM is one of the world’s leading sellers of cars and trucks under the Chevrolet, Buick, GMC, Cadillac, Opel, Vauxhall, Holden, Baojun and Wuluing and Jiefang brands. With operations on six continents, the company employs more than 160,000 people in over 100 countries.
GM was hard hit by the pandemic, as it had to shut down production. That caused an enormous drop in its cash supply. But with production back online, GM is already bouncing back.
The automaker swung to a third-quarter profit of $2.83 a share, a big improvement from its loss of $0.50 a share in the June quarter. In fact, GM generated $9.1 billion in free cash flow in the most recent three-month period.
Looking ahead, GM is the only manufacturer with a fully integrated plan to produce self-driving vehicles at a viable scale. It is also committed to an all-electric future.
Across 14 recent new vehicle launches, GM trimmed an average of 357 pounds per vehicle, saving 35 million gallons of gasoline and avoiding 312,000 metric tons of CO2 emissions per year.
Tesla is about to get a ton of competition. GM will launch 30 electric vehicles globally over the next four years, with more than two-thirds of them available in North America. All of GM’s leading brands — including Cadillac, Chevrolet, Buick and GMC -- will have EV models available.
The company’s management also expects its next-generation Ultium batteries to be available within five years. They will double the energy density of today’s batteries at half the cost.
Despite all these exciting developments, GM sits on the bargain shelf, selling at just seven times Wall Street’s consensus earnings estimate for the next 12 months.
Tesla is a sexy story. But GM is a far better buy now, and is also a great play on the future of electric vehicles. So, pick up General Motors at market today and place a sell stop at $36 for protection.
