GM stock dropped to $12-13 a share today. Should i buy while its cheap?

Question

Or would i be better off investing my money in aluminum cans?

Seriously- all joking aside it cant get much lower than what its at now without the company folding. Whats the chances in GM turning things around and making a investment worthwhile? At 12 bucks a share one could buy quite a bit if you are willing to take a risk.

Answer 1

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Answer 2

Have you ever heard the caution:

"Don't try to catch a falling knife!"?

Some companies DO go to ZERO and GM is still losing money.

What is a "fair" price for a company that is losing money (billions?) and not making money?

How good is management that put all it's eggs in to the truck and SUV market and was unable to see that was going to end? Or failed to react quickly enough when it did?

Answer 3

The only thing that has kept GM from being lower in price is buyers who think "it can't get much lower."      

Some stocks are down because of the economy.  Others are down because they deserve to be down.  GM has had a negative stockholders equity since 2006.   I think they have more problems than a bad economy.

GM probably won't go out of business.  But keep in mind that their problems didn't just start.  It is going to take them several years to become profitable.

You could put some money in GM and "hope" that in five years or so, you make a little profit.  But there are better choices.

Answer 4

This is a major automobile manufacturer, and regardless if it's GM or Ford the U.S. would never allow these companies to go away.

You however, have brought up an interesting question.  Should you buy while its cheap.

Many investors just don't get it.  What they fail to understand is that if you like a company, feel comfortable with management and are willing to hold onto it to reap the financial benefits of it.  Then why not buy it at its current price.

This is the same company that people were buying when trading at $35.00 October 2007.  Yes the economy isn't doing so well.  Yes, gas prices are on the rise.  Yes, they have had loses with GMAC financing the mortgage debacle.  But again, if you liked it at $35.00, then wouldn't you like it even more at $13.19???

But hold the phone!  People are going to invest in this company when they feel more comfortable with it.  What does that mean?  It means that the share price is selling at too huge of a discount, they want it to go up slightly, then they will buy.

However, you have to be a contrarian.  Be greedy when others are being fearful.  Be able to stick your neck out there once in awhile.

If I had excess funds I would probably drop a couple grand into this company.  And wait it out long-term.  But, I wouldn't double down on it, if the value drops to half of $13.19.  I would place monies in other investments and start to diversify a bit.  No I wouldn't buy oil stocks, no I wouldn't buy gold.  I would place some monies into discount retailers, alcohol manufacturers and other retail and bank sectors.  

Cause "when", not "if" the economy comes around.  These investements are going to provide amazing returns.  

Keep in mind that you do not realize a gain or a loss until the position is sold.

I would do it.  But then again thats my two cents.

Answer 5

I think it is a good idea. You can go for it because Gm is low priced and cheap. Go for a long term investment.

Answer 6

I bought 40 shares...... like you said, I dont think it'll get any lower...Hope for the best...good luck!

Answer 7

Famous last words "It can't get much lower" A sound investing strategy if I've ever heard one.

Answer 8

What makes you think it is cheap? It will be cheap after they bomb the next earnings report again. 7 dollars is cheap.