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Grt2bOutdoors
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Post by Grt2bOutdoors » Fri Jul 10, 2009 7:37 pm

If you enjoy gambling, then by all means. I think I'll play my chips at some other venue.

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HardKnocker
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Re: New GM an equity buy?

Post by HardKnocker » Fri Jul 10, 2009 7:42 pm

duhmel1 wrote:but often the companies are able to turn things around (see K-Mart/Sears).
Whaaaat?

tim1999
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Post by tim1999 » Fri Jul 10, 2009 7:52 pm

I only buy individual stocks in companies that I believe have a solid long term business model with growing or stable demand for their products or services. GM doesn't meet that criteria.

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Kenster1
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Re: New GM an equity buy?

Post by Kenster1 » Fri Jul 10, 2009 8:51 pm

HardKnocker wrote:
duhmel1 wrote:but often the companies are able to turn things around (see K-Mart/Sears).
Whaaaat?
K-mart was on the brink of bankruptcy -- their stock was almost worthless. But Hedge-Fund guru Eddie Lampert came in and swept it up. That was the huge blue-light sale. But one of the reasons why some distressed investors bought their cheap & distressed bonds was because most investors didn't realize that they probably wouldn't lose any money on the deal -- why? Because the balance sheet didn't account for the lucrative value of the real-estate holdings should there be a liquidation.

Then Eddie Lampert swooped up Sears and merged the two together.

K-mart was a dying retailer and Sears has been slipping -- Eddie Lampert was also no retailer turnaround specialist and so there was speculation as to how this would work out. No pun intented but was he just going to use Kmart/Sears as a storefront to manage the cashflow into more lucrative investment deals elsewhere?

Remember - Warren Buffett did something similar long ago in buying a distressed textile company called Berkshire Hathaway.

At the height of it all just a couple of years ago, Sears stock was trading over $150. Imagine if you had bought the distressed Kmart stock for $3/share or super cheap bonds.

So this is what is meant by the Kmart/Sears turnaround play -- not necessarily a reference to a big successful turnaround play with respect to the retail stores. The best thing going for it is the Craftsman brand name which is still valuable.

Yeah - I rarely go to Kmart for anything - only if I had to because it was nearby wherever I happen to be. Some of the Sears stores are still doing ok, not great -- their hardware & appliance section are still quite popular.
SURGEON GENERAL'S WARNING: Any overconfidence in your ability, willingness and need to take risk may be hazardous to your health.

duhmel1
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Re: New GM an equity buy?

Post by duhmel1 » Fri Jul 10, 2009 10:29 pm

Kenster1 wrote:
HardKnocker wrote:
duhmel1 wrote:but often the companies are able to turn things around (see K-Mart/Sears).
Whaaaat?
K-mart was on the brink of bankruptcy -- their stock was almost worthless. But Hedge-Fund guru Eddie Lampert came in and swept it up. That was the huge blue-light sale. But one of the reasons why some distressed investors bought their cheap & distressed bonds was because most investors didn't realize that they probably wouldn't lose any money on the deal -- why? Because the balance sheet didn't account for the lucrative value of the real-estate holdings should there be a liquidation.

Then Eddie Lampert swooped up Sears and merged the two together.

K-mart was a dying retailer and Sears has been slipping -- Eddie Lampert was also no retailer turnaround specialist and so there was speculation as to how this would work out. No pun intented but was he just going to use Kmart/Sears as a storefront to manage the cashflow into more lucrative investment deals elsewhere?

Remember - Warren Buffett did something similar long ago in buying a distressed textile company called Berkshire Hathaway.

At the height of it all just a couple of years ago, Sears stock was trading over $150. Imagine if you had bought the distressed Kmart stock for $3/share or super cheap bonds.

So this is what is meant by the Kmart/Sears turnaround play -- not necessarily a reference to a big successful turnaround play with respect to the retail stores. The best thing going for it is the Craftsman brand name which is still valuable.

Yeah - I rarely go to Kmart for anything - only if I had to because it was nearby wherever I happen to be. Some of the Sears stores are still doing ok, not great -- their hardware & appliance section are still quite popular.
I don't understand this ramble - my coment was very simple. Companies that emerge from bankruptcy are often very good buys. After being in bankruptcy for 1 1/2 years K-Mart (NEW) equities started trading at $15 per share, within a week it dropped below $13. Two years later it was above $160, more than a 10 bagger. UAL came out of bankruptcy in Feb 2006 at $36, in July it was $22, a year later it was $57 (it is now in the toilet but it was a good play for a year).

I am not touting GM as a great long-term investment - however a bounce for the next year is a very good possibility.

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Kenster1
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Post by Kenster1 » Fri Jul 10, 2009 10:44 pm

duhmel1 - I don't understand your comment.

The guy said "Whaaat" -- I just interpreted to mean what the hell are you talking about in terms of Kmart/Sears being a turnaround play.

I was pointing out that although the Kmart as a retailer may still suck -- Eddie Lampert bought them out of bankruptcy and investors who took the risk made a wonderful windfall. That's what I was trying to point out with repsect to the disconnect between Kmart as a retailer versus the stock performance -- and maybe they didn't know that and so made that "What" comment.
SURGEON GENERAL'S WARNING: Any overconfidence in your ability, willingness and need to take risk may be hazardous to your health.

duhmel1
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Post by duhmel1 » Fri Jul 10, 2009 10:50 pm

Then there's Loral reemerging in August 2005 at $28, a month later at $23, a year later at $50.

Leap Wireless International - Aug 2006 emerge at $26, two months later @20, three years later at $96.

Here's an interesting article circa 2000
http://www.turnaround.org/Publications/ ... ectID=1219

duhmel1
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Post by duhmel1 » Fri Jul 10, 2009 10:57 pm

Kenster1 wrote:duhmel1 - I don't understand your comment.

The guy said "Whaaat" -- I just interpreted to mean what the hell are you talking about in terms of Kmart/Sears being a turnaround play.

I was pointing out that although the Kmart as a retailer may still suck -- Eddie Lampert bought them out of bankruptcy and investors who took the risk made a wonderful windfall. That's what I was trying to point out with repsect to the disconnect between Kmart as a retailer versus the stock performance -- and maybe they didn't know that and so made that "What" comment.
My observation is that companies coming out of bankruptcy are good intermediate term investments (1-3 years) for because the debt burden (and in some cases labor contracts) have been removed. K-Mart became a real estate play instead of a retailer - Loral became a manufacturer only instead of a telecom services supplier. Will GM reinvent itself - who knows. The downside is that instead of some smart people taking over the company - we have the ownership primarity consisting of the UAW and the USG, each with their own agenda which is in conflict with GMs best interests. Maybe I'll just wait for the next bankrupt company to come on the scene and pass on this one.

m_j_paquette
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A cautionary note...

Post by m_j_paquette » Sat Jul 11, 2009 1:59 pm

Please remember that as of July 10, all good assets of the former General Motors (trading as GMGMQ) were sold to a new entity, Vehicle Acquisition Co., which will be renamed General Motors Co. The former General Motors (GMGMQ) is now Motor Liquidation Company.

The "New GM" holding all good assets is currently a privately held company, with 60.8% owned by the US government, and the rest held by the Canadian and Ontario government (11.7%), the health-care unit of United Auto Workers (17.5%). The remaining 10% is expected to go to GM's former bondholders.

Holders of stock in the former General Motors, GMGMQ, will have no ownership stake in the new company.

There has been talk of an IPO as early as next year for the new General Motors, but that's just talk. Be aware that GMGMQ is essentially stock in a defunct and empty shell company.

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alec
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Post by alec » Sat Jul 11, 2009 2:30 pm

Also note that trading in GMGMQ was halted on 7/10, so you can't buy or sell GMGMQ in the market for 10 days.

AFAIK, you can't buy shares of the new company, Vehicle Acquisition Co, in the market yet.
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duhmel1
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Post by duhmel1 » Sat Jul 11, 2009 5:35 pm

My comments relate to the equity of the new company when it starts to trade.

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Kenster1
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Post by Kenster1 » Mon Jul 13, 2009 11:13 am

GM Stock up 37% right now -- still available at the dollar store.
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Valuethinker
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Re: New GM an equity buy?

Post by Valuethinker » Mon Jul 13, 2009 11:21 am

duhmel1 wrote:The stocks of many companies do extremely well after they exit from bankruotcy. The old equity is wiped out and the old debt is severely reduced and replaced with new equity. Initially the stock price usually drops as as old bondholders dump their stock, but often the companies are able to turn things around (see K-Mart/Sears). Of course in this case we have the USG as major shareholders and we are already seeing business decisions being made to satisfy political whims.
Probably not.

Why?

1. overhang from US and Canadian government -- stock market will be anticipating the placing of that stock. Remember both governments will need cash badly (but will want to show a book profit on sale). Sets a cap on the share price.

See RJR post LBO-- KKR stake was an overhang on the market for years.

2. GM is competing in an industry with huge overcapacity, and will still have legacy cost issues which were not fully dealt with in the Chapter 11 process.

It wasn't just the debt, it is the post retirement healthcare and pension obligations. AFAIK these are not fully discharged. This is different from what Wilbur Ross achieved with the US steel industry, for example.

Whilst I was very sceptical about saving Chrysler (I couldn't see what value the company had, other than the Jeep brand and a few models-- which could have been realized via a post Chapter 11 sale) GM has stronger brands, stronger market positions, better technology and (had) a strong international business (due to be much smaller, but still a presence in Brasil, Asia etc.).

This is all to the good. But the world auto industry is still in a position of vast overcapacity and cutthroat competition.

This reminds me more of the airline industry than it does of other industries which have been successful chapter 11.

m_j_paquette
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Post by m_j_paquette » Mon Jul 13, 2009 1:28 pm

Kenster1 wrote:GM Stock up 37% right now -- still available at the dollar store.
No, that's GMGMQ, the stock for the defunct shell company. The gooroos finally halted it Friday afternoon. It should have been halted earlier in the week, or at the very least before the Friday open, but I suppose there were still pockets to pick.

The new company known as General Motors doesn't have public stock yet, and realistically can't do an IPO before Q2 2010.

I posted a cautionary not on this earlier in the thread. Don't be fooled. GMGMQ is not the stock you are looking for.

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Post by bearcub » Mon Jul 13, 2009 1:41 pm

There is a thread in the lounge {poll} asking who would make a commitment to buying a American made car. Not to promising. Many who answered yes said they would buy a Ford. G.M.---good luck on whatever choice you make.

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