GM Shares Rise After Buffett's Berkshire Moves Into Automotive Firm – ValueWalk Premium

GM Shares Rise After Buffett's Berkshire Moves Into Automotive Firm

GM Shares Rise After Buffett's Berkshire Moves Into Automotive Firm

Shares for General Motors Company (NYSE:GM) increased by 4.3%, the highest increase so far this month, after it was revealed that Berkshire Hathaway Inc. (NYSE:BRK.B) had a stake in the large US based automaker.

A few moments after it had been revealed that Berkshire Hathaway Inc. (NYSE:BRK.B) had a stake in GM, shares for the automotive giant increased by 3.9% and this tapered off, to close at $21.42. Warren Buffet’s company held 10 million of the auto maker shares on March 31, in a filing that disclosed US stockholdings. The total value of Buffet’s investment was put at $256.6 million- around 0.63% of the total GM shares in the market.

Analysts are of the opinion that the low valuation of GM was the driving factor that led Mr. Buffet to get the shares. Furthermore, this move by Berkshire Hathaway Inc.  (NYSE:BRK.A) (NYSE:BRK.B) has made the automotive industry excited since it is unprecedented. Before, the increase, shares for GM had fallen by almost 35% since its IPO in 2010, and back then they were valued at $33 a piece.

General Motors Company (NYSE:GM) recovered its number one spot in the world market in 2011 when it posted a record breaking $9.19 billion. In fact, the showing was seen as the best since 2007, and the good performance is set to continue due to the recovering auto market in the United States.

The CEO Dan Akerson said that GM had many more great brands and that they would be availed to the market in 2013. The head has also been instrumental in introducing small cars such as the Sonic so that a wider market could be reached, and he has also pushed the Cadillac and Chevrolet to be global brands.

During the recession, most Americans had put off buying new cars due to harsh economic realities, and during the period, the average age of vehicles used on US roads was at a high of 10.8 years. Therefore, most observers are of the opinion that the demand for cars is pent up, therefore the likelihood of General Motors Company (NYSE:GM) and other automotive firms selling more cars is higher than it has ever been.

The Oracle of Omaha is well known for making big bets on firms that he thinks are undervalued, and this newest investment- in terms of value is a drop in the ocean. But it has attracted a lot of attention, among shareholders and investors all the same, and we will wait and see if he has anything under his sleeve for the largest US auto maker.


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