Tags: Bass | GM | 50 | government

Kyle Bass: GM Could Hit $50 in 12 to 18 Months

Monday, 17 Mar 2014 09:57 AM

By Dan Weil

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While General Motors' shares have dropped 16 percent this year amid safety problems with its cars, hedge fund star Kyle Bass, founder of Hayman Capital Management, is bullish on the company.

He tells CNBC that GM's stock could reach $50 in 12 to 18 months. The stock closed at $34.09 Friday. Hayman's stake in GM makes up almost 25 percent of its portfolio, according to CNBC.

The government is investigating ignition problems with GM cars, and the company has recalled 1.6 million of them.

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GM is one of the most undervalued stocks in the market, Bass argues.

"It's one of the cheapest companies in the Dow and in the S&P. As the U.S. recovers, which I think nominal GDP should grow at 3.5 percent this year, . . . GM is going to take back some of it's market share."

And he maintains that the government may be on the hook for claims over GM's faulty ignitions, because the government took over the company when GM filed for bankruptcy in 2009.

"When I look at this, this was not a bankruptcy," Bass contends.

"It was a government takeover of GM. It may very well be that the government is liable for the claims that the government is looking into. A lot of these claims were discharged in bankruptcy, and the government ran the company for a while."

Morningstar analyst David Whiston also thinks GM won't be badly damaged by the recall.

"The company may well lose sales in the short run because of constant negative headlines, but the impact to its reputation depends on how CEO Mary Barra and her team respond over the next few months," he writes on Morningstar.com.

"We expect GM will continue to take responsibility and admit fault in how it handled the process during Old GM's existence."

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