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As GM goes, so goes the country? Both General Motors and Ford are poised to become cornerstone investments over the next five years
By Edward Strafaci
It is no secret that the history of these two automotive titans has mirrored that of the country’s industrial production history. They were once global economic standard-bearers who were eventually crippled by a combination of bloated overhead, unmanageable benefit obligations and intense foreign competition. However, after the pain of a strategic bankruptcy for GM and much-needed balance sheet and organizational reform at Ford, these two former heavyweights are clearly in shape for a comeback. To that end, we view both companies as core holdings. As we implied in our introductory piece, “man does not live by straight equity investments alone”, and this idea is no different. One of the secrets to successful professional investing is to review the balance sheets and options chains, for the most efficient way to take advantage of a solid concept. We will do that here. We will also follow up on this play in future pieces until we feel that the sector is fully valued. This is the way that investors like Buffett operate, why shouldn’t you? Take a core holding and extract as much value out of it as possible using a combination of income producing and equity investments focused on a theme. Our first step is considering these companies fundamentally, let’s have at it.
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