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General Motors: Bullish Capital Allocation Plans

Based on activist investor demands, General Motors (NYSE:GM) is initiating a large capital allocation plan. The global auto manufacturer has made an incredible turnaround from decades of struggles. GM recently raised the dividend and reported strong cash flow for 2014 to place it in this position to entertain the activist demands.

With the stock down from 2013 highs at $40, should investors use this opportunity to buy stock prior to the large buyback program?

GM ended 2014 with cash and marketable securities of $25.2 billion so clearly investors want the company to do something with that large cash balance. With net debt of around $20 billion, the auto manufacturer has to be careful that it doesn't return too much cash to shareholders and deplete the balance sheet.

With the company producing $3.7 billion in adjusted automotive free cash flow for 2014, GM has the ongoing cash flow to initiate this plan pushed by investor activist Harry Wilson. The plans include the following: Read more