Why Tesla and GM Roared Today
Jan 14th 2014 10:00PM
Updated Jan 14th 2014 10:02PM
Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.
After its biggest slide of the year yesterday, stocks bounced back on better-than-expected December retail sales today as the Dow Jones Industrial Average rose 116 points, or 0.7%. While many retailers complained of disappointing holiday shopping seasons and reported underwhelming sales figures, the official report from the Department of Commerce said that retail sales actually increased last month from the month before by 0.2%, or 0.7% when the volatile auto sector is stripped out. That was better than expectations of 0% or 0.4%, respectively. For the year, retail sales improved 4.2%, significantly better than the GDP growth rate.
Tesla Motors shares were flying higher once again, finishing up 16% after the electric car-maker bumped up its fourth quarter guidance by 20%, saying it now believes it sold and delivered nearly 6,900 cars last quarter. Management said that the two key drivers of demand were its "superlative safety record" and "great performance under cold weather conditions." Notably, these two points have been sore spots for the company and founder Elon Musk, as critics have harped on recent vehicle fires and shaky battery performance in cold weather. Musk has consistently dismissed those attacks repeatedly, and the stock is still close to its all-time high. Customers seem to agree with him as well as sales continue to beat expectations, but the stock is dearly priced at a forward P/E of 108.
Staying in the auto industry, General Motors was moving higher after hours, gaining 3% following its announcement that it will begin paying a dividend for the first time since 2008. At $0.30 a share, the quarterly payout gives shareholders a 3% yield and will be paid out starting March 28. Remarking on the decision, CEO Dan Akerson said, "GM is delivering consistently solid financial results, and the board understands that investors should share in this success." The announcement is the latest and maybe the final step in the manufacturing giant's return to full health following its 2009 bailout. Once derided as Government Motors, the Chevrolet maker saw the government sell the last of its shares a month ago. Profits returned years ago, and the cycle seems to be completed with the reissuance of a dividend. GM shares approached a 52-week high on the news and have doubled in the past 18 months.
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The article Why Tesla and GM Roared Today originally appeared on Fool.com.Fool contributor Jeremy Bowman owns shares of General Motors. The Motley Fool recommends General Motors and Tesla Motors and owns shares of Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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