Tag Archives: MGC

Is General Motors a Good Buy?

Yes, I know I’ve been remiss on regular updates, but I’ve been working very hard on other projects.

General Motors is relevant to ETFs because already it’s been included in 5 FTSE indexes. It will be added to two MSCI indexes on Nov. 30 and may join the Russell 3000 Index. Four of those indexes are tracked by ETFs. That means GM will be affecting your ETFs, boys and girls. Of course, one of the big benefits of ETFs is that they eliminate single stock risk. Which means one stock doesn’t ruin the fund.

The following are the indexes with corresponding ETFs:

  • Vanguard Total World Stock ETF (VT) tracks the FTSE All-World Index.
  • iShares MSCI ACWI Index Fund (ACWI) tracks the MSCI All-Country World Index.
  • Vanguard Mega Cap 300 ETF (MGC) tracks the MSCI U.S. Large Cap 300 Index.
  • iShares Russell 3000 Index Fund (IWV) tracks the Russell 3000 Index.

Actually, I did comment a lot when GM went under.  I told people to get out of the stock and how it would affect ETFs as the indexes they followed refused to ditch the shares until the bitter end.

So, it only seems fitting, I should address Government Motors as it issues its post-bailout IPO.

Anyway, you didn’t really think you were going to get shares of General Motors at the offering price, did you? Well, after taking a look under the hood of GM’s initial public offering, you’ll probably be glad that you didn’t.

The biggest reason to feel lucky is that the stock’s sellers — not the buyers — grabbed most of the first-day pop for themselves. When the shares went public on November 18 at $33, the sellers sucked up the premium that investors would have enjoyed had the shares come public at $29, the high end of the original pricing range. GM shares did jump to $35.99 on their first day of trading, but they closed at $34.19, a modest 3.6% above the IPO price. The stock closed at $33.48 on November 24.

Considering that you can still get GM’s shares for less than a buck more than the offering price, the question is, should you? Probably not. Even after the Detroit auto giant reduced its headcount by tens of thousands of workers and shed billions of dollars in liabilities as part of the U.S. government’s bailout, the company still has issues.

For the full story go to Kiplinger.com.