an tSionna {GE}

I have a certain cadre of my clientele that are retirees of General Electric {GE}.  I was asked yesterday by one of them what I thought about the stock.  I thought I would post this today since I did some money flow work recently on the company.  

GE reached a closing high of 21.50 on February 14 of this year.  Since then it has been all downhill.  At yesterday's close of 14.69 the stock is down over 31% from it's high and is down nearly 20% for the year.   GE is also back to trading right at the price levels from which it broke out in 1996! 

GE yesterday broke through the support range that it has held since the market sold off back in August.  The next level of support lies about a dollar below where it closed last night in the 13.50-13.90 range. 

GE is likely selling off more than the market due to it's international exposure and its industrial components.  Based on consensus earnings for 2011, GE trades with a 9 PE ratio.  This likely expresses Wall Street's fear that its earnings will need to be revised lower.  GE also has a current dividend yield around 4%.  From what we know today that dividend is likely safe assuming that we don't have a much worse economic period than analysts currently think possible.  Based on historical models and based on current earnings estimates,  if we avoid a recession we can impute a fair value forecast for GE between 16-22 for 2012.  If we do go into a recession then we can come up with a fair value forecast for GE between 11-16 for 2012.  Please note these are estimates based on historical factors and based on information that we currently have available.  There is no guarantee that any of these prices may be met, nor are we saying that the stock could not go lower than that $11 implied price value!  

GE pretty  much illustrates the current market quandary.  Markets are so confused about the direction of the economy that there must be two sets of analysis for almost everything.  That is markets have to develop scenarios for the US having a recession or a period of slow growth.  The problem is the market right now is confused on which way we're going.  When confusion reigns prices flop around or sometimes like now go lower. 

*Long GE in certain client accounts.