Perfect time to get into GM?

GM is trading at its 26 year low while being hit is being hit by the perfect storm of a possible recession and high gas prices, making it the perfect time to get in.

GM brought in $205 billion in revenue last year, but the whole company is worth less than $10 billion. Given that GM is making an effort to turn itself around, it will offer huge rewards if it succeeds. An only 1% profit margin would equate to a PE of 5 to put it in perspective. 5% profit margins would make a PE of 1.

The CEO, Rick Wagoner, is setting the company up for a turnaround, attacking its core problems of labor costs, but more importantly, producing quality cars that people want to buy. It might take years before GM solves these problems, but the rewards should be worth the wait.

While there is no guarantee of this, the current price is so low that the only risks you have to worry about is bankruptcy. It is a possibility, but I don't think the chances are great for a company that size. You can manage the risks by position sizing while adding more when the company's prospects start looking better.

Hell, if GM does face bankruptcy, they can probably just fire it unionized labor and they are on their road to profits. It will suck for all those workers, but there isn't much GM can do if they aren't bringing in the money. Hopefully both the UAW and GM can come up with some fair compromises, so that workers can get good compensation while still being competitive with the rest of the world.

I am not getting into GM before 2009 because I like my current holdings better, but I think now is the time to think about building a position.