I read a good article in Barron’s today and can’t wait to share it with investors.
What is capital operation?
In Sections 6-7 of my book “The Rules of 10 Baggers“, “Five Capital Operations Have a Strong Impact on Stock Prices”, the entire section is dedicated to introducing the capital operations of enterprises.
The content will not be repeated here. Interested investors can refer to the contents of my book. And I also specifically emphasize that capital operations are very important for all listed companies.
Finally a good example for capital operation
GM’ share price is a standout
The stock prices of peers in the industry will be terrible in 2024, with only General Motors standing out. As of the close of trading on December 17, GM’s stock price had risen 45% since 2024, about 17 percentage points higher than the S&P 500. It is the only stock among the major US automakers or auto parts suppliers that is still rising in 2024, except Tesla.
By comparison, shares of Ford Motor fell 4%. Suppliers Aptiv and Magna International fell 20% and 29%, respectively. Excluding GM, the average decline among large U.S. auto stocks was 23%.
Improving fundamentals
While Tesla’s electric vehicle sales are poor and its stock price has fallen 40% this year, and the world’s auto industry is being hammered by China’s auto industry, GM’s profits are improving.
Wall Street estimates operating profit of $13.5 billion in 2024, compared with $12.4 billion in 2023. Higher profits have boosted investor sentiment and expectations are rising. A few months ago, Wall Street forecast 2024 operating profit of $12.1 billion.
Repurchase is the root cause
Share buybacks reduce the number of outstanding shares and increase the value of the shares, which usually results in higher earnings per share.
In November 2023, GM announced a $10 billion stock repurchase plan. In June 2024, the company will invest an additional US$6 billion. The total stock repurchase amount of US$16 billion accounts for approximately 50% of the company’s total market value when GM announces this plan in November 2023. Please reread that last sentence a few times!
Stock repurchase is the most typical and most effective method of capital operation.
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