Shares of General Motors rose to their highest level since re-entering public markets more than two years ago, as investors continue to await a sale of the rest of the GM stake owned by the U.S. government.
THE SPARK: The government received ownership of some GM stock in exchange for a $49.5 billion bailout in 2008 and 2009. It has been steadily working to divest itself from the stake and is expected to shed its remaining stake in the company by year-end.
Investors and analysts expect the company to start a dividend or buy back some of its stock once that happens, two moves that could create significant value for shareholders.
The automaker also has performed well. On Tuesday, it reported a 14 percent gain in auto sales during November.
THE ANALYSIS: Morgan Stanley analyst Adam Jonas said the company must be cautious about returning too much cash to shareholders in the form of buybacks.
"We find that longer-term investors are not as focused on buybacks, preferring GM to wade in with a sustainable dividend policy that won't compete for precious resources during what are still early stages for the re-invention of the company and its strategy," the analyst wrote in a Friday research note.
He noted that the company still has to launch products, reduce the complexity of its business and fix its European operations.
"GM has more 'home improvement' projects than any company we cover," Jonas wrote.
Jonas raised his price target on the shares to $47 from $45 and noted that the company has the power to "add or destroy enormous amounts of value" over the next decade.
"Investment and execution are critical," he wrote.
SHARE ACTION: Up 2.8 percent, or $1.11, to $40.20 in Friday afternoon trading. Earlier in the session, the stock hit a new high price of $40.38. The shares have climbed about 39 percent so far this year.