PreMarket Prep Stock Of The Day: General Motors

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Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

The PreMarket Prep Show is not all about short-term trading. On many occasions, the hosts will make longer-term calls on the broad market as well as individual issues. Dennis Dick made a bold call on General Motors GM on Tuesday's show, making it the PreMarket Prep Stock Of The Day.

The Value Trade: For the past few months, one of the main topics on the broadcast has been the monumental shift from growth stocks to value stocks. Whether it be the Reddit crowd getting behind such issues as GameStop GME, which was a value play before the ridiculous rally, investors have favored companies that actually make money. What a concept.

General Motors fits nicely into that category with a P/E (Forward) of 11.59 versus the industry average of 25.75, which makes it a bargain compared to its peers. Apply Tesla Inc's TSLA P/E forward of 169.50 to General Motors and you may need a few more digits on your calculator to get the correct price.

Price Don’t Lie: Let's assume you were late to the game and did not purchase shares of GM when it bottomed last March at $14.33 and did not participate in the year-end rally to $41.84. Instead, you purchased shares at that price early in 2021.

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The good news is that you would have only taken a few dollars of heat when it bottomed Jan. 5 at $40.04 and resumed its move higher. At its current price of $62.56, investors are sitting on a tidy 50% gain.

In Good Company: Warren Buffett’s Berkshire Hathaway (NYSE: BRK-A) first invested in GM in 2012, then gradually grew its position to 80 million shares worth $2.4 billion as of Sept. 30, 2020. As of Feb. 17, 2021, it was his 10-largest holding at 72 million shares.

That is truly the definition of “buy and hold.”

Bold Statement: On Tuesday’s show, Dick discussed his long-term thesis. Besides being upset with himself for not buying more shares on the recent pullback, he outlined a very bullish scenario for the issue.

“I would not be surprised [if] the EV story with GM continues," Dick said. "I can see the scenario where GM is the largest EV maker in the world if so, it could get to $100.”

The entire discussion from Tuesday’s show on the issue can be found here:

Price Action: After a lower open, GM immediately bottomed at $60.44 and began to move higher. As of 2:40 p.m. EST, it has easily surpassed Monday’s high ($61.19) and made a new all-time high at $62.65.

In order to make a new all-time closing high, it would need to surpass Monday’s close of $61.14, which is about a dollar lower than its current price of $62.50.

Disclosure: Joel Elconin and Dennis Dick are long shares of General Motors.

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