The macro manager, Kyle Bass keeps doing the unusual repeatedly. Kyle Bass, who is not known for investing in equities, has now taken a new position in General Motors Company (NYSE:GM). The hedge fund manager published his thesis on a members-only investor website, Harvest. The other hedge funds that own General Motors Company (NYSE:GM) are David Einhorn’s Greenlight Capital, Taconic Capital and York Capital.
Kyle Bass likes GM’s risk/reward profile
According to the brief presentation, Kyle Bass’ Hayman Capital thinks that the risk-reward profile makes the company a very attractive option to hold among large caps. The fund sees a 48% upside to GM’s current share price, and noted that,
“A strong case can be made that GM should trade at a premium to the group given its unique position and strong underlying fundamentals, a best-in-class leverage to global growth markets, improving operational efficiency from ongoing turnaround efforts and an improving product cadence “
Read interview of Kyle Bass from a new book.
Hayman’s thesis is also based on the positive trends in the auto industry globally, with situation gradually improving in the European region.
In Kyle Bass’ analysis, there are a number of near term catalysts that can drive up the stock. On of them being the potential exit of the U.S government as a stakeholder, which will remove several operational and technical headwinds. After the government ownership is out of the picture, General Motors can issue a substantial dividend and/or pursue a share buyback program. In Hayman’s estimates, this would stimulate a 38% increase in the share price, considering it trades at a dividend yield comparable to its competitor Ford Motor Company (NYSE:F).
Other tailwinds that the presentation counts are: the company’s inclusion in the S&P 500 (INDEXSP:.INX), brand new design for its flagship pickup trucks and SUVs and accretion from the retirement of its Class A preferred shares through the end of next year.
Other unusual equity investments that Kyle Bass has taken up recently, include his stake in J.C. Penney Company, Inc. (NYSE:JCP).