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I have been following General Electric (NYSE: GE) for years, believing it was a sadly underperforming stock with high quality businesses but a lackluster management team who at least from outward appearances are just caretakers. They have added almost no shareholder value in ten years in the form of stock appreciation and in fact have gone down lately, as the chart indicates.
Although I have been interested in the stock, I was always able to find something more compelling and I always wanted a bargain. When it was $40, I had a buy order in at $36, then lowered it to $34, then $32, and finally $30, where we bought in on Friday. Today it touched a 52-week low of $29.78 but is trading over $30 as of 2:30. (UPDATE: closing price $30.33 up $0.27, +0.90%)
Over the years, I have read more bullish sentiment than bearish despite the weak stock price, but that seems to have changed recently for the worse. For example, Seeking Alpha rates GE a hold.
When GE was $34, I got into a discussion with one of my colleagues that there was value but I wanted a greater discount. He thought I might be getting a little greedy. Then the company reported an earnings disappointment and down it went. Then I lowered my own assessment. This was followed by the announcement that the GE Appliances group was on the selling block.
There are those who think GE is heading still lower. I have no idea, but given the 4% dividend yield (dependable for over 100 years), the below average P/E, and higher than average net margins and return-on-equity, I decided to park some money here.
According to 'my pal Warren' -- "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."
So which did I get?
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of BRK.B and GE.
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Reader Comments (Page 1 of 1)
6-10-2008 @ 4:27PM
william lindblad said...
Given the technology they possess it would appear that "hold" would be appropriate. Something that will remain stable, even with caretaker management.
6-10-2008 @ 6:15PM
Michael Schneider said...
Insiders have been buying at GE-- some before the recent decline though. Their position in energy is a big plus but then they have the financial division and financials are still especially vulnerable. The 4% dividend should help if you have to wait for recovery but further trouble in financials could be trouble for GE.
6-10-2008 @ 6:41PM
Sheldon L said...
It will take far less than ten years to get back to $40+
;-)
6-10-2008 @ 9:48PM
HeyJuan said...
I would suggest buying the January 25 call on GE.
You will invest less money, have more leverage, and your risk is owning GE at 25, but losing the option premium.
6-11-2008 @ 9:27AM
Bruce E Warnock said...
We are retired folks with a large position in GE. Ah, but the year 2000 and GE at $60. It is long past the time to make a change in top management. Immelt has had his chance to run this fine company, but he has to go.
Also, GE needs to separate the positions of CEO and Chairman of the Board, so at least the CEO has somebody to answer to.
The Street has lost confidence in Immelt due to his recent blunder in forecasting earnings so unless he moves on, GE might just languish where it is.
6-11-2008 @ 3:03PM
Raybo said...
As I noted twice, earlier in the year, GE is going to $24 ish with a then 5% yield. Unfortunately, the CEO has a record of buying the stock that mirrors his talent at the helm of the company. Just like always, when GE sells a wind turbine, the pr presses roll for days. When all the airplanes come back from the crippled airlines-silence. And then there is the leverage and the 40% of earnings from financial services. Sorry- that's just the way it is. Raybo
6-12-2008 @ 2:13PM
JJC said...
I'm sorry to say it, but Immelt must go.
6-12-2008 @ 4:13PM
DEK said...
GE @ south of 30 and yield @ north of 4 spells small downside for us shareholders. I think downside going forward is for Jeff. He just doesn't understand the concept of damage to the brand ..... dealings with Iran ...... NBC ........ Jeff, your day is coming .....
6-12-2008 @ 4:46PM
LB said...
that's the problem as long as we expect 4% that's what we'll get, I put GE right there with companys like Kraft, companys with such large overhead (with waste) with that spend it if you got it attitude .. as long as we give some back....it's sad to see because these companies actualy still make stuff(their getting fewer),if they were run properly not only would the stock and dividend be worth far more ... they would actualy better handle a ripple in the economy.