GM: TAIL RISK (KURTOSIS) VS. EARNINGS POTENTIAL (EPS). STRATEGIC MANAGEMENT AT A GIANT'S TURNING POINT

 

Observing the General Motors (GM) price chart, along with trend lines (linear, 3rd and 6th order polynomial), is crucial for understanding the historical price trajectory.

A linear trend with a positive slope would indicate steady, long-term growth. A low slope suggests stable, but not explosive, growth.

Polynomial trends (3rd and 6th order): These curves are a curve-fitting exercise that seeks to capture market nonlinearity and cycles (peaks and valleys) more accurately than a straight line. The third-order or cubic trend generally captures broader cycles, such as an initial growth phase, a plateau, and a final acceleration/deceleration phase, while the sixth-order or high trend, being of a higher order, has the ability to fit specific historical data very well (high R² or coefficient of determination), capturing every fluctuation. While it shows a high degree of correlation with past data, its predictive capacity (future projection) is very limited, as it models "noise" as much as the actual trend. The descriptive statistics table, which includes the range and correlations, is vital. There is a clear trend that polynomial curves model very well, but the simplest model that captures it should be used The essence of the trend for projection (perhaps linear or of order 3).

Comparing the mean, median, and mode, and studying kurtosis, are fundamental to understanding the shape of the return distribution and, therefore, investment risk.

The fact that the mean, median, and mode differ confirms the presence of skewness or asymmetry in the distribution; that is, the Gaussian bell curve is distorted.

If Mean > Median > Mode (Positive Skewness), the right tail is longer. In terms of returns, this could indicate a higher probability of obtaining extreme (albeit rare) gains on the positive side.

If the mean < median < mode (negative skewness), the left tail is longer, signaling higher risk because there is a greater probability of experiencing extreme losses (large drops). In price analysis, skewness indicates where most of the data is "moving" relative to the average, revealing an underlying trend. Kurtosis measures the peakedness of a distribution compared to the normal distribution (mesokurtic, kurtosis = 3, or excess kurtosis = 0). Kurtosis is a crucial indicator in risk management because it measures the probability of extreme events (outliers), which are what cause the greatest losses in portfolios. High kurtosis, or leptokurtic kurtosis, when it shows an excess > 0, implies that the distribution has a higher peak and Critically, heavier tails (fat tails). In finance, this means there is a higher probability of extreme price movements (large gains or large losses) than the normal distribution model would predict (which underestimates this risk).

To reduce investment risk, it is essential to study kurtosis: high kurtosis forces the investor to recognize that volatility (measured by the standard deviation) underestimates the true risk. More sophisticated risk models (such as conditional Value-at-Risk - CVaR) are required, along with adjusting position sizes to protect against these "heavy-tailed" events.

The cumulative probability (p) shows the probability that the price (or return) will be less than or equal to a certain value. Its complement, q = 1 − p, shows the probability that the price (or return) will be greater than that value. This data is essential for calculating risk metrics such as Value at Risk (VaR) or for establishing profit/loss thresholds. For example, if a price has a p-value of 0.95, it means there is a 5% probability (Q=0.05) that the price will exceed that value, which is useful for assessing upside potential.

If the histogram has a symmetrical and smooth bell shape (similar to the curve of the normal distribution), it confirms that the price or return distribution is close to normal.

If, on the other hand, the histogram shows a skew (longer bars to one side) and/or a sharper peak with long tails (confirming leptokurtosis), it refutes the assumption of normality.

If the distribution is not normal, traditional finance models based on normality (such as the Markowitz model or using the simple standard deviation as the sole measure of risk) are inadequate and underestimate tail risk. The frequency polygon, by smoothing the histogram, helps visualize the shape of the distribution and compare it directly with the theoretical normal curve.

Based on this statistical and econometric analysis, is it worthwhile to invest in General Motors (GM) right now?

Polynomial models show that the price fits a historical pattern very well. If the simple model (linear or third-order) suggests positive growth, there is a basis for considering the investment. The difference between the mean, median, and mode indicates skewness, and the significance of kurtosis suggests that the distribution of returns has heavy tails. This implies that investing in GM carries a higher extreme event risk than would be estimated using volatility alone.

The histogram likely corroborates the non-normality of the price/return distribution.

The investment decision requires further analysis, but the preliminary statistical diagnosis indicates that: Yes, but with caution and active risk management. If the overall price trend (linear or cubic) is positive and upward, trend analysis suggests growth potential. The high kurtosis and skewness mean that the investor should be prepared for sharper and larger-than-expected price movements. The risk of a significant loss is greater than standard risk indicates.

The investment should be made with the understanding that sudden drops (and rises) are more likely. It is crucial to use risk management strategies that consider higher-order factors, such as kurtosis. For example, establishing stricter stop-loss orders, limiting position size, or using derivatives to hedge tail risk (put options).

This analysis is purely statistical. The final decision should be complemented by a fundamental analysis (earnings, debt, outlook for the EV/Auto sector, competition, etc.) of General Motors.

In summary, investing in GM appears to be in a phase of potential growth (depending on the slope of the trend), but it carries an unusual risk profile that requires more sophisticated portfolio management.

The technical analysis you attached, with data from November 11, 2025, shows a strong divergence between the moving averages and the short-term oscillators/indicators, which generates uncertainty and warrants caution. Technical indicators are used to identify the strength and direction of the trend, while oscillators help determine overbought (overvalued) or oversold (undervalued) conditions. The Average Directional Movement Index (ADX) is above 70, confirming that the upward trend is extremely strong. However, in combination with an RSI close to 70, this indicates that the upward movement is mature and there is a high risk of a technical correction (a pullback or price retracement) due to buyer exhaustion.

Moving Averages (MAs) focus on the direction of the trend over different time horizons.

The long-term moving averages (50-day, 100-day, and 200-day moving averages) are in a buy signal, indicating a fundamentally bullish outlook. This suggests that the current price of $71.22 is significantly higher than the 50-, 100-, and 200-day moving averages. This corroborates the growth identified in your econometric trend analysis. In the short term (5-day and 10-day moving averages), the 5-day and 10-day simple and exponential moving averages are split, but the 5-day simple moving average of 71.36 and the 5-day exponential moving average of 71.29 are in a sell signal (or near the recent price of $71.22). The main trend for GM is bullish (corroborated by the long-term moving averages). However, the "sell" signal from the 5-day moving averages suggests that the price has already fallen slightly below its 5-day moving average. This is the first sign of profit-taking or the beginning of the technical correction anticipated by [the analyst/investment analyst]. The ADX and RSI.

 Pivot points are used to establish support (S) and resistance (R) levels for intraday or weekly trading.

The fact that the latest close (71.22) is below the classic pivot point (71.31), but above the S1 support level (71.24) in some methodologies (such as Camarilla), reinforces the idea of ​​a phase of indecision or consolidation in the very short term.

The combination of statistical analysis (high kurtosis and skewness) with technical analysis (indicators) provides a very clear picture of the risk.

The underlying trend (long-term) is bullish (confirmed by the long-term moving averages and their econometric analysis). The tail risk (risk structure) is high (confirmed by the kurtosis) (indicating extreme price events).

At the present time (short term) or exhaustion of the buying trend and consolidation (confirmed by the high ADX, RSI near 70, and 5-day moving average in a sell position).

To invest, it is advisable to wait or invest with small positions and moderation. GM's stock is at a technical turning point after a strong upward move:

Short-term indicators warn that a technical correction towards support levels (possibly the 20-day moving average at 70.71) is very likely. Entering now is buying at a point of overextension. Investors should wait for the stock to complete the correction (i.e., wait for the price to fall and find support, perhaps near the 20- or 50-day moving averages) before opening a large buy position, thus reducing the risk of buying at the peak. If you decide to buy now, it should be a small position with a strict stop-loss placed below the S1 and S2 support levels (71.18–71.24), in line with the need to mitigate the tail risk demonstrated by your statistical analysis.

The "Strong Buy" signal from the summaries is overshadowed by the "Overbought" warning from the oscillators, making caution the best strategy.

The most relevant element is the positive surprise of 20.69% in EPS ($2.80 vs. $2.32) and the 16.05% increase in pre-market trading. Exceeding expectations by more than 20% is a sign that the company is generating much more efficient profits than Wall Street had anticipated.

The rise in the share price is not just a reaction to a good quarter; it is the company's revaluation by the market The market now has greater confidence in its future ability to generate profits. This suggests that, despite the high kurtosis detected in its statistical analysis (which implies extreme volatility), recent extreme movements have been positive and confirm a strong long-term upward trend (corroborating its long-term moving averages).

Despite a year-over-year decline in total adjusted EBIT, GM's operational management shows underlying health. Achieving its largest US market share since 2017 and keeping incentives below average are signs of strong demand for its products and its ability to price without relying on deep discounts.

Reducing dealer reservations by 16% is crucial. This means that demand is absorbing supply, reducing GM's inventory costs and positioning it to sell at higher prices when inventory is tight. Herein lies a point of caution, directly related to the uncertainty seen in its technical analysis (overbought/consolidation). The adjusted North American EBIT margin of 6.2% is solid, but below the long-term target of 8-10%. GM is investing heavily ($4 billion in capital and $1 billion in V8 engines/EVs). This investment temporarily reduces margins and EBIT. The market is aware of this, but the raised guidance for the full year (adjusted EBIT to $12-$13 billion and EPS to $9.75-$10.50) indicates that management expects these investments to generate significant returns in the future, especially in 2026. Fundamental analysis suggests that GM is a solid, undervalued, and transitioning company.

The P/E ratio of 14.9x (from its previous data) and price-to-book ratio of 1.0x suggest that the stock is not expensive compared to the broader market. The high full-year EPS forecast ($9.75–$10.50), if confirmed, would make the forward P/E ratio significantly lower than 14.9x, implying that the stock is fundamentally undervalued even after the 16% rally.

Investment in GM, despite high volatility (kurtosis), is justified by its current strong financial performance and future growth prospects once investments in electric vehicles and operational efficiency mature.