GE Analysis {Part VI }
Final Thoughts:
I do not know if GE will cut its dividend or lose its AAA credit rating. GE will likely remain under pressure or its stock price depressed until this issue is resolved. It’s other businesses are unlikely to rebound until there begins to be some pick up in the world economy. However I think that its current price discounts many of these issues. Here are reasons GE could go continue to decline: It would likely head lower if the market heads lower, if investors react less favorably than I consider likely if either the dividend is cut or the AAA rating is cut, the world economy continues to worsen or some other unforeseen event rises from the company. I would note that Warren Buffett got to look at GE’s books last fall and that did not prevent him from putting money in the firm, albeit at highly favorable terms to him. Terms that you or I could not get and actually diluted your interest in the company. But it was a vote of confidence that the company was not going out of business.
While I do not know whether we are at GE’s ultimate low price I am of the opinion that the company has likely discounted much of these concerns. Thus unless something comes forward to change what I see today, I do not think I would be a seller of its shares. Most firms on Wall Street rate GE as a current hold which means they think it will perform in line with the market. I would tend to agree with that analysis. However, I would also not say that it is time to buy shares in the company unless it was a shorter term trade or speculation. For longer term investors, I would prefer to see if GE can quit its longer term decline and enter a period where the stock trades sideways for awhile. If it can do that then it is likely the stock could trade north towards at least $20 at some time in the next 12-18 months.
However, it is my opinion that GE is not the company that it once was. It is now apparent that there has been more risk on its balance sheet through GE Capital than investors once thought. This is likely over time to compress its stock market multiple. I therefore believe that should GE get back to those $20 levels, investors should reevaluate their long term commitments. We will again review the stock for you should it at some point in the near future advance to those levels.
I do not know if GE will cut its dividend or lose its AAA credit rating. GE will likely remain under pressure or its stock price depressed until this issue is resolved. It’s other businesses are unlikely to rebound until there begins to be some pick up in the world economy. However I think that its current price discounts many of these issues. Here are reasons GE could go continue to decline: It would likely head lower if the market heads lower, if investors react less favorably than I consider likely if either the dividend is cut or the AAA rating is cut, the world economy continues to worsen or some other unforeseen event rises from the company. I would note that Warren Buffett got to look at GE’s books last fall and that did not prevent him from putting money in the firm, albeit at highly favorable terms to him. Terms that you or I could not get and actually diluted your interest in the company. But it was a vote of confidence that the company was not going out of business.
While I do not know whether we are at GE’s ultimate low price I am of the opinion that the company has likely discounted much of these concerns. Thus unless something comes forward to change what I see today, I do not think I would be a seller of its shares. Most firms on Wall Street rate GE as a current hold which means they think it will perform in line with the market. I would tend to agree with that analysis. However, I would also not say that it is time to buy shares in the company unless it was a shorter term trade or speculation. For longer term investors, I would prefer to see if GE can quit its longer term decline and enter a period where the stock trades sideways for awhile. If it can do that then it is likely the stock could trade north towards at least $20 at some time in the next 12-18 months.
However, it is my opinion that GE is not the company that it once was. It is now apparent that there has been more risk on its balance sheet through GE Capital than investors once thought. This is likely over time to compress its stock market multiple. I therefore believe that should GE get back to those $20 levels, investors should reevaluate their long term commitments. We will again review the stock for you should it at some point in the near future advance to those levels.
posted by CR English at 6:06 AM
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