Insider Buying: General Motors’ CFO Just Made a $1 Mil Stock Purchase

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CFO stock purchases can be extremely informative insider transactions. CFOs have considerable insights into their firms’ finances and some studies have found that these insiders earn higher profits following their purchases of company stock than CEOs do.

In this report, we are going to highlight a large CFO purchase at General Motors Co (GM:US). General Motors is one of the largest automotive companies in the world. Headquartered in Detroit, USA, it produces vehicles in around 30 countries worldwide. The company is listed on the New York Stock Exchange and currently has a market cap of around $45.05 billion.

Insider Buying at GM

2iQ’s insider transaction data shows that on May 19, GM’s CFO Paul Jacobson purchased 31,000 shares at a price of $32.60 per share. This trade cost the insider $1.01 million and increased his holding to 186,847 shares.

Experienced CFO

Mr. Jacobson is an experienced CFO. Before joining GM in December 2020, he served as CFO of Delta Air Lines for nearly nine years. During his time at Delta, he was named the airline industry’s best CFO eight times by Institutional Investor magazine’s poll of Wall Street analysts and investors. Our Insider Model views his large stock purchase as bullish.

Low Valuation

GM stock has experienced a significant decline in recent months. Back in mid-February, the stock was trading near $43. Today, however, it’s at $32. 

At current levels, GM has a very low valuation. With analysts expecting the automotive company to generate earnings per share of $6.78 for 2023, the forward-looking P/E ratio here is currently under five.

One analyst who likes GM after the recent share price fall is Morgan Stanley’s Adam Jonas. Earlier this month, he upgraded the stock to ‘overweight’ from ‘equal-weight’, stating that it was oversold, and that it offers an attractive risk/reward proposition at present. Jonas also raised his price target from $35 to $38 – nearly 20% above the current share price.

“The market has sufficiently discounted challenges to making money in EVs, while under-appreciating slow-melting ICE (internal combustion engine) flows and improved capital discipline”, wrote Jonas in a research note.

It’s worth noting that in late April, GM lifted its full-year profit and cash flow forecasts due to stronger-than-expected demand and higher prices.

In light of the low valuation here, we see the insider buying as a bullish development.