Why complain about GE and not JNJ -- a puzzle?

Posted Feb 13th 2008 5:02PM by Sheldon Liber
Filed under: Management, General Electric (GE), Johnson and Johnson (JNJ), Bargain Stocks

I have been following General Electric Company (NYSE: GE) and Johnson & Johnson (NYSE: JNJ) for many years. This is probably very common among investors since both are broadly held, very large-cap stocks. Both companies have illustrious histories, strong management, and have been very rewarding to investors over the years -- but not the past few years!

Both stocks seem undervalued to me and I have been thinking about buying some shares. I own some JNJ already and might want to own GE if I can get it at a deep discount. This got me thinking about another issue. Investors have been expressing their frustration with GE's lack of appreciation over the last few years and some have gone as far as to call for the split up of the company and/or the resignation of CEO Jeffrey Immelt.

For some reason Johnson and Johnson has not suffered the same fate. However, when you look at the following chart that shows three year stock performance you will notice great similarity.

Chart

Notice that in terms of appreciation both company's valuations start and stop in the same place, which is 'nowheresville.' They are actually lower now then they were three years ago so that your only benefit was the dividend. In the case of GE it's currently 3.6%, and for JNJ it is 2.6%. Both significantly over the 1.8% average of the S&P 500 Index.

Why no complaints about JNJ? Why is GE getting al the heat? Is it because Immelt followed the charismatic leader Jack Welch so the spotlight is brighter? Perhaps is it because GE has been more active doing larger mergers and acquisitions under Immelt and investors are looking for the reward from these actions?

Perhaps investors are just impatient, but why more so for GE than JNJ? I don't know, do you?

Sheldon Liber is the CEO of a small private investment company and the design and research principal for an architecture & planning firm. Disclosure: I own shares of JNJ.

Tags: GE, General Electric, GeneralElectric, JNJ, Johnson and Johnson, JohnsonAndJohnson, Liber

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Reader Comments (Page 1 of 1)

2-13-2008 @ 5:32PM

ross said...

GE
I have purchased products in the past from GE and had nothing but problems with the product and GE people over warranty on products that were poor products and labor . I have been happy every since not using GE appliance's and if they went off the earth I would never know. GE may have better products but it not appliance's. BE AWARE

2-19-2008 @ 8:06PM

Kurtis said...

I have no clue of what GE products you are using. I have GE products all around my home and every one of them has worked great and have been extremely durable. I am not an investor but when I do, GE will definitely be in my portfolio.

2-13-2008 @ 10:16PM

geezer said...

In 2000 allowing for a 2 for 1 split J&J was selling for $50.00 per share . Now it is selling for $63.00. That is a $13.00 profit. Not good but some thing. In 2000 allowing for a 2 for 1 split GE was selling for $60.00 per share . Now it is selling for $35.00. That is a $25.00 (40%) loss. There really isn't a comparison

2-13-2008 @ 9:46PM

Sheldon L said...

The comparison was for the last three years. You are correct that if you go back 10 years JNJ is the superior stock. So I guess the "Geezers" would know.

Thanks for your comment G. Now tell us how long JNJ does have (since three years is short) before the shareholders become restless?