The Motley Fool: GM firing on many cylinders
It’s not crazy to be wary of investing in General Motors (NYSE: GM), due to its significant debt load and the fact that it was forced to declare bankruptcy during the Great Recession. It’s doing a lot of things right lately, though, and is worth considering for your portfolio.
General Motors’ cars are garnering much more favorable reviews, it has the greatest market share in America of any automaker, and it will likely stop losing money in Europe within the next 12 months. The company’s sales in China rose 7.5 percent in April, due chiefly to solid sales growth for its SUVs and premium Buick and Cadillac cars.
U.S. sales fell in April, but the drop was more than accounted for by a planned reduction in low-profit sales to rental-car fleets, while sales of its profitable trucks and SUVs continued to shine. The company is working to increase its sales to commercial and government fleets, typically more profitable sales channels. It’s also investing in future growth, taking a stake in ride-hailing company Lyft and buying a self-driving-car startup. Sales dipped in the last quarter, but profitability rose.
General Motors is a cyclical company, so investors should expect ups and downs. But it’s offering long-term believers a dividend yield recently near 5 percent, an attractive stock price and a good chance of growth. (The Motley Fool has recommended General Motors.)
Ask the Fool
Q: What are “fixed income” and “equity income” mutual funds? - B.T., New Orleans
A: They’re both mutual funds designed to deliver income to shareholders. The term “fixed income” refers to bonds, which typically have fixed interest rates. Bonds are often thought of as safer than stocks, but not all are. U.S. Treasury bonds are rather safe, backed by our government, municipal bonds generally offer tax-free income, corporate bonds carry more risk (and thus higher interest rates), and junk bonds offer the highest interest rates and highest risk.
“Equity,” meanwhile, refers to stocks, and equity income funds will be focused on dividend-paying ones. This is different from growth or value funds, which invest in companies whose stock is expected to advance, regardless of whether the companies even pay a dividend. Many fast-growing companies don’t pay any dividends, as they funnel earnings into further growth.
Mutual funds focused on income are great for those who need regular distributions of cash, such as retirees. However, even retirees might remain invested in some other funds or stocks, simply selling off a portion each year to generate the income they need.
Research funds at Morningstar.com, and learn about promising ones via our “Rule Your Retirement” newsletter, which you can try for free at fool.com/shop/newsletters.
Q: Where can I find a stock’s price on a certain day several years ago? - K.V., Keene, New Hampshire
A: You might call the company’s investor relations department and ask the folks there. It’s easier online – at sites such as finance.yahoo. com, where you can type in the company’s ticker symbol, and once on its quote page, click on the “Historical Prices” link in the menu on the left side of the page.
My dumbest investment
After watching a familiar actor hype its products on TV, I bought almost $10,000 worth of what I was told would be “almost uncirculated” (AU) gold and silver coins from a certain company. I failed to see in the fine print of the customer agreement that the company “reserves the right to fill a customer purchase with similar products of varying grades of coins” from its inventory.
So instead of receiving AU-grade coins, I received coins that my local coin dealer (who was certified by the American Numismatic Association as a qualified coin appraiser) called scruffy and scratched and that had obviously been heavily circulated. I had no choice but to return the coins for a 40 percent loss after having had them in my possession for too many days to get a full refund. - L.L., online
The Fool responds: That stinks. It’s smart to always look into any company with which you’re considering doing business. When we looked up your gold coin seller, we found that it had an A-plus rating from the Better Business Bureau, but it also had 19 complaints listed there, which had all been closed. The A-plus is clearly good, but the complaints are a red flag.