When was the last time you read anything positive about a car company not named Tesla (Nasdaq: TSLA)?
I can tell you it’s been a while for me. After the COVID-19 pandemic and the U.S. presidential election, the single biggest story of 2020 might have been the truly epic move in electric vehicle stocks. Tesla’s stock price has risen by a factor of 12 off of its 52-week lows. It’s now the fifth-largest stock in the S&P 500 index by market cap.
Yes, Tesla. The company that was proud to produce half a million cars last year has somehow catapulted itself into one of the most valuable companies in the entire world and is now more than 10 times larger than General Motors (NYSE: GM) by market cap.
That’s all fine and good. We know Tesla’s stock defied gravity last year. And kudos to anyone that enjoyed that ride. It was one for the ages.
I’m more interested in where I should put my money today. And looking ahead, it would seem that boring, stodgy old GM stock is the better buy.
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GM Has a New Look
We’ll get into the details in a second. But first, let’s talk perception. Tesla has captured the imagination of a generation by offering a stylish car, free of fossil fuels and with the ability to drive itself. It really is a piece of science fiction come to life. It’s an amazing feat.
But here’s the thing. General Motors hasn’t been asleep at the wheel. GM is building out its own electric fleet, and the company announced in November that it expected 40% of the models sold in the U.S. to be electric by 2025, including high-end Cadillac and Hummer models.
And as for self-driving technology, GM is also very much in the running via its Cruise self-driving subsidiary.
I don’t have a good way to handicap which automaker ends up leading in the electric, self-driving future. But I can look at their respective stocks to determine which one should be a better buy.
GM Stock vs. TSLA Stock
Based on our Green Zone Ratings system, Tesla rates a 47 out of 100, placing it squarely in the middle of the pack. It rates well in terms of momentum, at a 94, and in growth at 77. But it’s nothing to write home about on the other four metrics (size, quality, value and volatility). We would expect a stock with Tesla’s neutral rating to, at best, match the broader market’s return.
Let’s compare that to General Motors. GM stock rates a very solid 75, putting it well into “bullish” territory for us. (A rating of 60 or higher is Bullish, and 80 or higher is Strong Bullish.) We expect bullish stocks to outperform the market by two times on average over the following 12 months, based on our historical research.
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Let’s do a deeper dive to see what’s driving GM’s stock rating.
Value — Perhaps not surprisingly, GM rates highest based on value at 95. Only 5% of the stocks in our universe are cheaper based on our assortment of value metrics. Value stocks have struggled over the past decade. But as 2021 really kicks into gear, value stocks are showing signs of life again. I expect that to continue.
Momentum — This might come as a surprise given the attention on Tesla and other high-flyers, but GM rates highly on momentum at 80. General Motors is quietly rallying, having jumped by more than a factor of three off of its 52-week lows in the past few weeks, and it shows no sign of slowing down.
Growth — GM’s business was obliterated in the 2008 meltdown and Great Recession that followed. But since the company emerged from bankruptcy and relaunched itself via an IPO in 2010, it’s been a steady grower. GM rates a very respectable 78 in growth.
Volatility — GM stock isn’t too volatile, which is good. All else equal, low-volatility stocks outperform high-volatility stocks over time. GM rates as a 59, putting it in neutral territory here.
Quality — GM’s quality score is also neutral at 54. We base the quality score primarily on profitability and balance sheet strength. Post-bankruptcy, GM is a higher-quality company that its iteration that failed during the Great Recession.
Size —GM rates a big fat zero on size, meaning it’s larger than 99.5% of stocks we rate. All else equal, our model favors smaller companies.
Bottom line: So, there you have it. GM stock vastly out rates Tesla, particularly in value. It’s hard to bet against Tesla, given how well it has performed of late. But our numbers make a strong case for GM being the better buy in 2021.
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