Being a contrarian investor isn't easy. Just ask Motley Fool Hidden Gems analyst Bill Mann. In a classic commentary from early 2004, Bill told the story of investors who publicly went against the grain as the bubble was first coming into view in 1996. They were wrong -- very wrong -- for extended periods of time, and paid a heavy price as a result. But then the bubble popped, and they were right again. That's just how it goes sometimes.
And other times, you'll just be wrong. Really wrong. Today finds me wondering whether that's the case for billionaire investor Kirk Kerkorian. Allow me to explain. Kerkorian -- who bulked up his stake in General Motors (NYSE:GM) in June -- on Monday finished selling 12 million shares of the automaker for roughly $250 million in proceeds. (Get the details in this filing.) That trimmed his ownership interest from 9.9% to 7.8% of GM's shares outstanding.
The deal must have hurt. After all, Kerkorian's 12 million stubs netted something in the vicinity of $21 each when he sold. That's well below the price he got in April, according to this filing with the Securities and Exchange Commission. Investors don't usually sell at a loss -- especially investors of Kerkorian's caliber -- unless they're looking for an out.
Kerkorian certainly isn't talking that way. Tracinda, his investment company, told The Wall Street Journal that it sold for tax reasons. That would make sense. With the end of the year looming, investors tend to take losses to offset investing profits, thereby minimizing the tax bill on capital gains.
But is that really all that's going on here? For its part, Tracinda says it still holds 44 million shares and could buy or sell more at a later time. Fair enough, but I'm a bit uncertain more buying is in the cards. Remember: Negotiations to get Tracinda a seat on GM's board recently failed. That may have prompted Kerkorian to contemplate the attractiveness of the shares without the benefit of his plans for an extreme makeover. With razor-thin profits, a negative return on equity, and a rapidly deteriorating balance sheet, there isn't much to like. And I, for one, wouldn't blame him for driving away from this stock as fast as possible.
Hit the brakes! Related Foolishness is right in front of you:
- Or maybe Kerkorian read fellow Fool Brian Gorman's sharp analysis.
- Buh-bye , GM. Hello, Toyota (NYSE:TM).
- Is rival Ford (NYSE:F) just another airline?
- The saber-rattling at GM began in June.
There's cash in the stock market's trash. Just ask Philip Durell, advisor for Motley Fool Inside Value ; his investing approach is beating the market by more than 3% as of this writing. Get in on the action by taking a risk-free 30-day trial. Or sign up for a year and Philip will give you Stocks 2006 , our analysts' best picks for the year ahead, free. Either way, all you have to lose is the prospect of better returns.
Fools, now is the time to open your hearts and wallets to worthy causes! Please support our five Foolish charities at www.foolanthropy.com.
Fool contributor Tim Beyers inherited a GM car from his parents loooong ago. He's never bought one, and he doesn't plan to. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. You can find out what's in his portfolio by checking Tim's Fool profile. The Motley Fool has an ironclad disclosure policy.
