While growth stock TSLA has dropped down to 2020 levels (-61% YOY), heritage brands weather the volatility a bit better. General Motors is down 35% YOY but generally moving sideways and may be a safer bet.
General Motors makes Buicks, Cadillacs, Chevrolets, GMCs as well as vehicles under the Holden, Baojun, and Wuling brands. Known for being reliable, they are a go-to for automotive-dependent businesses such as daily rental car companies, commercial fleet customers, leasing companies, and governments.
The company has recently been making headlines with its push into EV
- GM Grew EV sales nearly 60% in 2022 (Source: Barrons)
- Partnership with Domino's Pizza to lease 800 custom branded 2023 Chevy Bolts (Source: Forbes)
- GM expects EV profits to match ICE in 2025, several years ahead of previous estimates (Source: CNBC)
Even though Detroit-based GM is more than a century old (founded in 1908), their newest offerings include safety and security services, automatic crash response, roadside/crisis/emergency assistance, navigation, remote control applications. They are also developing self-driving technology, and a highly anticipated electric pickup truck. Other areas of business are vehicle financing (through GM Financial) and subscription services in their app ecosystem. They also re-instated dividend payouts last year, adding to investor interest.
Technicals: GM has a couple of indicators going for it, a bullish flag, double bottom, some previous consolidation into a falling wedge. But is the gap down a good dip or a harbinger of worse to come? (see chart)
Trade idea: Use a defined outcome strategy to capture up to 18% profit (12% annualized) but also have some downside protection as long as GM stays above $28 at maturity (a 22% drop from current prices).
Buy 1 $35 call, Sell 1 $40 call, Sell 1 $28 put, all expiring 6/21/24
Capital required to secure short put: $2798
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