General Motors Will Enter New Businesses Very Important to Investors

I’m a long-term Tesla bull. Yet, I am also aware that General Motors has been the better investment in 2021. GM shares are up 44.5% in 2021 (258% higher since the pandemic-driven lows of 2020). And Tesla stock is down 4.1% this year.

When I initially acquired GM shares in early 2017, the company paid a $0.38 quarterly dividend with a yield over 4%. My reasoning for acquiring GM shares then was not about the dividend yield. At the time I was very aware how this legacy automaker was investing heavily in a future world of EVs, autonomous technology, and mobility solutions. My theory at the time was that Wall Street eventually would understand GM’s strategy and drive GM shares higher due to the prospects of a profitable long-term future for the company. Unlike many, I never believed the future automotive world would be a zero-sum game with Tesla winning and all others losing (particularly all legacy automakers losing).

Interestingly, General Motors has not paid a dividend since March 2020. The company suspended dividend payments and share buybacks to conserve cash as the pandemic forced most automakers to halt vehicle production. As a GM shareholder, I could not be happier about GM ceasing their dividend payment. GM CEO, Mary Barra, recently told Reuters “the company [now] has more productive uses for its money.” For me (and I believe for Ms. Barra), this money is better spent on more EV development, increased battery technology and battery manufacturing capacity, new electric vehicle commercial ventures like BrightDrop, development of additional revenue streams for OnStar telematics applications, and increasing their autonomous driving technology along with new mobility business solutions. These are the investments that are more valuable for long-term share price growth than any dividend payment or short-term stock buyback. This is why I believe GM will be one of only a few legacy automotive winners in a future transportation world that some believe could be a $10 trillion global market.

I reallocated my taGMan holdings in early January because Tesla had become too large of a component of that portfolio. Prior to the reallocation, Tesla shares grew to represent over 60% of taGMan stocks. For me, +60% allocation for any stock is uncomfortable. For this guy, who recently tweeted that he’s retiring at 39 after amassing $12 million worth of Tesla, no amount of Tesla seems to be too much. I’m not that kind of investor, however. Prior to my Tesla reallocation, I did not own Microsoft or Amazon. Tesla’s share price growth allowed me not only to reallocate, but also to acquire new shares in those companies as well. Initially, after the reallocation, Tesla represented 30% of the portfolio. Today, with Tesla shares being under pressure, that allocation has fallen to 25%.

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TaaSMaster, LLC is not a registered investment advisor or broker/dealer. All investment opinions expressed by TaaSMaster, LLC are from personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors may occur.