Capital operations are the root cause General Motors’ 30% rise so far this year

Capital operation

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 this year have been miserable, with only General Motors standing out. As of the close of trading on June 14, GM shares had risen 30% this year, about 16 percentage points higher than the S&P 500 Index. It is the only stock among the major U.S. automakers or auto parts suppliers that is still rising so far in 2024.

By comparison, Tesla shares fell about 28%. Ford Motor shares fell 4%. Suppliers Aptiv and Magna International fell 20% and 29% respectively. Excluding General Motors, large U.S. auto stocks fell an average of 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.

Capital operation
credit:Ideogram

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