$16.36
0.36 (+2.26%)
General Electric Company (GE)
CAPS Rating:
A diversified industrial corporation whose products include major appliances; lighting products; industrial automation products etc. Its services include product services; electrical apparatus installation, engineering, and repair and rebuilding services.
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There are too many companies out there with better fundamentals whose stock prices have fallen substantially farther than GE's. GE has massive debt, potentially crippling exposure to financial markets, and not nearly enough cash to insure against even a moderate financial crisis.Much is made of the advantage GE's AAA rating gives it over other banks. However, that AAA rating is in serious danger, to say the least; it's difficult to fathom how a company with GE's balance sheet could ever warrant that kind of confidence. At any rate, it's increasingly clear that the credibility of Moody's and S&P's credit ratings is dubious at best.GE is one financial hiccup away from having to go hat-in-hand to Congress, which would quickly consign them to the dollar-stock scrap heap along with the likes of GM and Fannie Mae. The source of such a hiccup could be macro, such as a new liquidity crisis in an asset class GE has exposure to, or micro, such as a rating downgrade. Since the latter is looking increasingly likely, a collapse of GE's financial business is a real possibility. GE seems to be trying hard to scale back that side of their business, but I have severe doubts as to whether they're in any position to get out fast enough.If that happens, and I think it's fairly likely, then we're looking at the next big bailout story right here. Even if GE does manage to hold on, there are simply too many better places to put your money, no matter which of GE's many sectors you're trying to gain exposure in. Do yourself a favor and find a stock with a bigger upside and less risk; trust me, there are plenty out there.
Do you have a few specific suggestions?
Sure. I prefer Emerson for a most of their electronics and appliances, General Dynamics or L-3 for defense contracts, and Foster Wheeler or ABB for engineering and infrastructure. I don't have any suggestion for media exposure, because I think that's just a terrible sector right now, particularly with traditional media like television, which GE is in. For banking, another sector I'm leery of, I'm thinking Wells Fargo or maybe even Goldman Sachs.The problem with GE is that they have their fingers in far too many pies, many of which have no logical connection to one another. When you have manufacturing, media, and a bank under one roof, it's hard to be a well-run company.
I agree with their fingers in many pies comment. I believe GE is a strong buy for the next coming years- with alternative energies and partnerships with Hitachi in the Nuclear industry GE is set to grow their Energy business. Infrastructure will benefit with the new adminstration in Washington- looking for clean water, power distribution solutions, and natural gas transmission. If you go back to early 2007, Morgan Stanley made recommendations to GE to help capital investors understand the GE model and its complexity. At that time Morgan Stanley made recommendations of selling assets due to worth more outside of the GE portfolio (GE Plastics, GE Appliances, portions of GE Capital, and NBC) then within. From a strategic standpoint Jeff Immelt sold most/all of GE Plastics, Genworth, and trying to sell the appliance business. The plastics and appliances businesses hold something in common volatility and low margins. I believe in the near future GE will be streamlining itselfs (early retirements/layoffs) to become more competitive in many industries. Long-term GE looks like a strong buy, short-term will probably be a roller coaster. You mention many great companies (General Dynamics, ABB, etc), which stand to profit when global demand increases. One might suggest some of the supposed job creations coming in the near future will be at domestic engineering/service companies (GE, Fluor, Halliburton, etc) with the push for natural gas exploration/drilling (GE acquired sensing and drilling technologies in the past 3 years) and infrastructure revamping. If you buy now you at least get 7% dividend which will stay in place for 2009.
I read somewhere that - if I remember correctly! - a small community college in the southwest started a solar curriculum and GE hired every single solar graduate, in approximately 2007.
Honestly, a good take on GE since the stock price took a 50 % whack since January 5. So, now, with their fresh dividend cut that will save them billions, I think they'll pull out OK and rise again (no time soon, however - give it time)...I'd be interested in what you see with GE now.
YO LO CREO , ASI , PERO , TAMBIEN ,
While I'm utterly humbled by the shellacking my rating has taken over the last two weeks, I'll take a stab at it.GE has definitely improved its position since I made this pick. However, I'm not changing it until I'm more confident that their dividend cut has saved their AAA rating. I noted a rating downgrade and a dividend cut as the two biggest threats, and the downgrade is by far the graver of the two. Basically, I want to wait and see how the rating agencies react to this news before I change my stance.
Great call BSHumphreyII. In my opinion, this is still an underperformer. Everyone now loves it after the capitulation selling, but I see inadequate tangible equity and a company that still has to rely on government backing just to sell bonds. Seems to be following the same pattern as every financial firm that kept saying "everything is fine". Firms that are fine don't need government support. For the next week or so the stock will probably continue to go higher. But the buyers down here better have trailing stops to lock in gains.
I think, if anything, I was a bit conservative. Immelt says he's ready to run the company as a double-A, but I have to wonder if he really is. They need to trim a lot of exposure in GE Capital for them to be able to weather the kind of multi-billion dollar hit their balance sheet will take with that kind of a downgrade. I really wonder if they'll have enough time to do that.If they're downgraded in their current state, I don't see how they avoid Chapter 11, or, more likely in today's environment, a bailout.
I company that made 4 billion dollars last year and you are seeing them as a bailout candidate. Tisk, tisk. I love buying the third largest company in the world at six bucks and I am loading up accordingly. It still amazes me how seeing a great company like this not being a buying opportunity is still happening.
That's a nice 20 your sporting their chief. I bought at average of $10 and plan to hold until 2012. This is my Obama play since Immelt is his buddy.The one thing that bothers me about this stock is the lying.Read 4th quarter report and quickly deduced that they could no longer pay their dividend, profits were equal to dividend.Got an e-mail from Jeff saying that the div was safe through 09.Two days later I received the news that the div was going to be slashed in the 2nd qtr.What was the point of the first e-mail?
I agree 100%. I bought at $6 as well and am about to buy more at $12. GE will be an "out-front" company as the economy rebounds. Plus, what's wrong with "traditional media like television". There may come a day when most of us like to get all of our news from other sources, but I think TV will be difficult to depose as preferred "legit" outlet.
Do you still consider this position valid after the following happened:The Dividend cut was a smart move, although it went against what Immelt wanted.The loss of AAA really doesn't mean anything in the current lending environment.Given that the stock was priced in with GE Capital not only not having any value at all, but actually taking away from the value of the company - after GE Capital went into huge depth about their exposure (or lack of it) do you still believe they will underperform the market after the Infrastructure stimulus starts gaining momentum?
It's possible GE has turned around, but I want to wait and see what their books look like next quarter before I agree that the rating downgrade didn't have a significant effect.The stimulus will take some time, and because I'm skeptical that the stimulus will be of any benefit to the economy, I'm also skeptical that it will have a net positive effect on any large conglomerate like GE which will need a lot more than a few government contracts to see renewed growth.
This was a great call in January, but for the long term I don't see how you can continue to give GE an underperform. They have mostly recovered from the financial disaster, and now they once again look like a very "safe" company. They are well-positioned to take advantage of Obama's infrastructure spending via electrical systems, wind power, solar, etc. Plus, people will always need home appliances - that's never going to change. Target price: $20.
There are two reasons. First, while I generally like the operating side of their business, I think the benefits of Obama's infrastructure spending to specific business are overstated. Gaming if and how government money is going to be allocated doesn't strike me as a particularly sound investment strategy. Also, as I've said before, GE is huge, and I doubt a few government contracts are going to make a huge difference in their bottom line.
More importantly, though, I don't think we've seen the end of GE's problems in the financial side of their business. They still have a significant exposure to the loan market, and don't have as much set aside to cover defaults as do most other banks. Also, they have a heavy exposure to real estate, and there's a significant risk that those assets are overvalued.
Regardless of what happens with their earnings, another major writedown of their assets would mean a substantial drop in their stock price. I don't see this as a "safe" company at all. GE probably won't go bankrupt, but I also don't see its potential future returns as worth the risk of devaluation, so I'm keeping it as an underperform. Another way of putting it is that GE is a great appliance and engineering company, but a terrible bank, and the bank side will continue to weigh it down.
I had been bullish on GE for a while.
I was happy to bail out of GE after working through a huge loss that began at buys at $26. The downward spiral never stopped much to my amazement. When Immelt 'lied' about the safety of the dividend that was the last straw. He has earned in my opinion ( I'm a 28 yr retired GE sales engineer) the position of the worst CEO at GE in 40 yrs. He is a disaster at PR. I see no communication skills 'selling' GE to investors/public (future investors and employees.) I don't see any leadership at the top of GE. They still have world class engineering skills but the opportunity to make easy money in the financial area led to higher and higher risk in order to post increasing earnings. Meanwhile many divisions withered away, Automation, worldclass motors and generators, industrail control, Appliances (Who was Whirlpool 40 yrs ago and now LG and Samsung are major share competitors.) Plastics without any new technical breakthroughs like Lexan or Norel (35 yrs ago) stuggled even with the engineered plastics use on Saturn doors and Buick fenders and is now gone. I question if GE can ramp up fast enough to be 1 or 2 in nuclear power generation. The leadeship of Welch is missing. The 'we can do anything' in the existing technical product lines seems plagued with doubt and hesitation. It might be fear of failure is so thats BAD Leadership. Barney Frank just gave GE Capital a big gift to go with the $$millions the Obama administration funneled to GE through some tiny bank loophole. GE Capital 'beggin' for bailout money; shame or humilation or just business? Failed leadership. Retire Immelt and clean up GE Capital, make, promote and sell the world's finest jet engines, locomotives, medical imaging systems, appliances and lighting products then I'll reconsider.
I think GE is still a steal at these prices GE Capital is profitable and it was the one part of the company responsible for the shareholder sell off. The company is a mini Mutual Fund trading for at least half its value if not more what is not to like?
mollykat, my thoughts exactly. GE simply isn't being run as an engineering and high-tech manufacturing company, which is what they're best at. Instead, they're just another "too big to fail" financial conglomerate that is holding our economy hostage and ransoming it for taxpayer money.
ozzfan1217, would you invest in a mutual fund with GE Capital's exposure to commercial real estate and loans? I sure wouldn't. GE Capital was profitable because they invested in pumped up assets like commercial real estate, loans, and credit cards (which are in huge trouble), and by exploiting the spread provided by their AAA rating (which is gone). Now, GE Capital is projecting $34 billion in losses over the next two years, and GE is struggling mightily to downsize GE Capital. If GE isn't confident in their financial division, why should you be?
I'm not changing my red thumb on GE any time soon, because I see big writedowns on the horizon.
I'm not taking any chances. I dumped all my GE stock this morning. I'd rather take a profit than to end up like investors of Enron or Madof. I feel GE thinks just because they put so much support in this administration that this administration is going to support them by throwing business their way, but citizens are starting to wake up to the pay to play that is going on. I don't think the final results are going to be good. I feel a huge ponzi scheme is going on right before our eyes and it will be thousands of times worse than what Madof got away with for too many years. The only question now is how long it is going to take for this to be the News Alert we watch one morning when we wake up and find it plastered all over our TV's.
So, when does it pay to look at shorting a company? If the market continues at its current pace . . .