Dear John: I’m interested in buying stocks long term for retirement. I do not understand the stock market very well and need help in deciding which ones to buy. I am only interested in buying a few companies I can hold on to that will stand the test of time. One company I bought a few years ago was General Motors. Now I am wondering if I should keep it. Is the dividend safe? Can car sales in China turn the company around? I am thinking that now is a good time to buy as prices are down, so I would be able to buy more shares. G.R.
Dear G.R.:If you don’t understand the stock market then let the pros pick your investments. Get into a mutual fund and don’t look at the performance too often. That’s if you really are a long-term investor.
It is true that the stock market historically outperforms other investments over time. So if you truly can keep your money invested through thick or thin then you should be all right.
The problem is that we could be going through a very thin period right now. So, an amateur picking individual stocks might be a lot like someone picking horses at the track based on the color of the silks or because their names are cute.
Not a good idea.
As for GM, it’s not doing well. And despite Wall Street’s habit of finding even the slightest good thing in an earnings report the experts are hard pressed right now to find the silver lining in GM’s recent $3.25 billion loss in the first quarter of 2008.
Oh, the loss was a little bit less than Wall Street expected. But that’s not really a ringing endorsement of the stock.
There are currently only five “buy” recommendations among the 15 or so analysts who follow GM on Wall Street. And since the financial community is loathe to say anything bad about a company that might become an investment banking client that number is not positive.
There are also no “sell” recommendations, but that might be more in line with Wall Street’s habit of keeping corporate management happy. Most of the recommendations are the unenthusiastic “hold” kind.
Deutsche Bank’s analyst Rod Lache said GM’s loss was made less awful by currency and trading gains – not the sort of thing a car manufacturer would be proud of. “Cash burn and sustainability of earnings remain key concerns,” Lache told clients.
He’s mainly worried that GM’s materials costs are increasing, that sales in North America aren’t improving and that higher margin vehicles like SUVs are being hurt the most by the economic slowdown.
GM is expected to lose large amounts of money this year and in 2009. Ah, but 2010 could be a winner, the analysts think. The dividend? Companies will do almost anything before cutting dividends. But if that “cash burn” continues and the credit crunch causes GM trouble with financing its losses, who knows?
Problems at GM’s financing group, GMAC, are also not out of the question, especially if people start defaulting on car loans at the same rate they are on mortgages. GM’s stock has had a nice lift over the past month, although it’s only about half the price of a year ago.
If you’ve got the stomach for it, stick with GM. But I think mutual funds are the better bet.
Send your questions to Dear John, The N.Y. Post, 1211 Ave. of the Americas, N.Y., N.Y., 10036, or john.crudele@nypost.com.
