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The objective of a bear market is to completely break the will of investors. The mission is accomplished when all hope is lost.
In our current state we are quite close to seeing the will of the investor being completely wiped out.
The flip side of that hopelessness is the power of surprise.
If the market is expecting the worst, even the smallest blip of good news can trigger a sharp rally. That can be the case with stocks as a group or individual stories.
Last week, I released my Top 10 Stocks for 2009. In putting together the list I wanted to include stocks that were priced for the worst and yet offered the opportunity to surprise.
In that way, I hope to generate a return for the year that will significantly out perform the market.
On the list was General Electric (NYSE: GE). The huge industrial conglomerate has been completely pummeled. The stock has been in the tank for some time, culminating with a steep drop during the past two months.
Even the talking heads on GE-owned network, CNBC, seem completely defeated with respect to their own positions in GE stock. They constantly mention the company in not-so-veiled contempt.
With GE selling for less than $13 per share at its lows, I would say investors have thrown in the towel.
The expectation is not bankruptcy. Instead, the feeling is that there is little hope for gains.
It is an exacerbated stock if there ever was one, and that's exactly why I want to own GE at this time. One surprise of success has the potential to shock the stock to the upside.
We got the surprise on Tuesday, and investors were duly rewarded. GE announced that it expects to hit the low end of its prior guidance for the fourth quarter. More importantly the company stated that it expects to pay a dividend of $1.24 in 2009.
That news, combined with its intentions to lessen its lending exposure by reducing leverage at GE Capital, sent shares up nearly 14% on the day Tuesday. (Too bad that news didn't come out after Jan. 1, when I start tracking the results of my Top 10, but oh well.)
A surprise can be very powerful when all hope is lost. I think GE has the potential to offer more positive surprises in coming months.
It's not too late to enjoy future appreciation as the stock still trades well below its 52-week high of $38.52 per share.
GE is still one of my favorite names for next year and beyond.
Tuesday was just the start.
Jamie Dlugosch is a contributor to InvestorPlace.com.
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Reader Comments (Page 1 of 1)
12-04-2008 @ 11:31AM
Jason said...
General Electric -Another overseas sellout.
12-04-2008 @ 3:28PM
Frank said...
I'm sorely tempted to buy GE stock, but I'm waiting to see if the market goes lower. Whatever it does, I'll buy GE.
GE is poised to be leader of the pack when nuclear energy comes back in the USA. More nuclear energy is inevitable. Wind and solar are not going to make it, and biofuels are a sick joke.