Arnold Van Den Berg (Trades, Portfolio) is the founder of Century Management. Van Den Berg is a value investor, and considers himself a student of Benjamin Graham.
Arnold applies value investment strategies as his investment philosophy. His investment research seeks to determine the appraised value of a company, often referred to as intrinsic value. Investments are then made at a significant discount, normally 40% to 65% below the company's current intrinsic value. This is his margin of safety. Arnold usually holds 35-40 companies when fully invested, and invests primarily in U.S. headquartered companies.
Arnold initiated a position in General Motors (GM, Financial) last quarter by buying 478,985 shares. General Motors is under a turnaround, and its business is improving. It has now been profitable for 21 consecutive quarters. Last quarter, GM's business delivered strong core operating performance with almost all key operating metrics including global deliveries, net income and adjusted EBIT improving.
For FY2015, management is expecting adjusted EBIT and adjusted EBIT margins to improve in all automotive regions. For FY2016, the company's target is to reach 10% adjusted EBIT margins in North America, profitability in Europe and maintaining strong net margins in China.
The company is passing benefit of this strong performance to its shareholders and intends to raise its common stock dividend 20% to $0.36 per share from second quarter of the current year. This is over and above $5 billion in buy-backs announced earlier this month. At current valuations, the announced buybacks will reduce GM's share count by 8.2%.
The company is receiving positive analyst commentary recently. Citigroup (C) recently added General Motors to its focus list and reiterated its Buy rating on the company. According to analysts, investors are missing some important catalysts that can likely help General Motors' stock price. In particular, he talked about margin expansion potential from 2016 and 2017 product cycles, accelerated European sales recovery, exit from loss making Russian operations and tailwinds from lower raw material prices. Morgan Stanley analyst also recently upgraded the stock citing potential for “radical strategic changes”.
General Motors is trading at 8.22 times FY2015 EPS. The company has an attractive dividend yield of 3.20%. Out of 19 analysts covering the company, 11 are positive and have buy recommendations, six have hold ratings and two have sell ratings. The company's improving performance is attracting attention of insiders, sell-side analysts and some of the most successful fund managers. I believe General Motors offers a good value at the current levels.
