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General Motors Company (GM)’s 20% Free Cash Flow Yield Is Too Enticing For Kyle Bass

Kyle Bass, founder and principal of Hayman Capital Management, L.P still sees General Motors Company (NYSE:GM) as too profitable an opportunity to miss as his fund remains invested in the company. In an interview with CNBC, Bass revealed the secret to what makes General Motors such a great company even after the ridiculous amount of recalls.

Kyle Bass

As far as the recalls are concerned, Bass jokingly said that the good news after the 30 million recalls is that only 5 million General Motors Company (NYSE:GM) cars are left on the road, and hence there can’t be more recalls. On a serious note, he drew attention to the company’s attractive valuation, even in the midst of all the recall drama.

“[…] Look at the valuation of this company, its worth $28 billion today in Enterprise Value. They will do 16.5 EBIDTA next year. They will do $6 billionish in free cash flow. It’s a 20% free cash flow yield. If there was a private equity firm large enough to buy, you can have 30% to 40% leverage fee […],” said Bass.

Bass further substantiated his bullish outlook for General Motors Company (NYSE:GM) with a firm belief in the company’s current management. Many critics have failed to differentiate the recall issue with the company’s fundamentals and its management as well. Bass, clearly did not fall into this trap, and this is perhaps one of the things that make him such a successful value investor.

” […] I think the management is doing a great job with this company. Look at the operating performance of the company. They are taking market share back from Ford, which they lost during the bankruptcy. They didn’t invest in one full cycle of R&D due to the bankruptcy. They are much leaner, capacity utilization is in the 90’s. By every metric that you look at GM it’s doing great, except form the recall issue which I believe will be behind them in the next few months […],” remarked Bass.

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