Ah, General Electric Company (NYSE: GE). I own a long-term position in the company. It's been cut down to size in terms of worth. My cost basis on that investment is much, much higher than the current price of the shares. While I'm not happy about that, I'm frankly even more disappointed by the reduced dividend.
However, it's a long-term position as I say, and I intend on keeping it for the future, my belief being that better times are ahead for the industrial/financial conglomerate (hopefully I'm right about that). However, I did try trading GE last year in a short-term account. I lost money on the trade. That's why I find it so distastefully painful to see GE shares bouncing off their recent 52-week low.
And what a bounce it has been. 52-week low: $5.73 near the beginning of March. Today's price as I write this: $9.98. An earlier reading had the shares at above $10! I can't stand this! Did I screw up? Well, I'm not so sure. The problem with trying to catch a falling knife is you can get very bloody very fast. It's happened to every investor and/or trader. In a market like this, I think it was good advice to stay away from GE even at $5.73. And what about now?
Well, I think anyone would be hard pressed to characterize this current rally as anything but a bear in disguise. In fact, Jim Cramer has the same feeling. If it turns out to be the genuine bullish article, you know what? We won't know until the fact has been established. Here was my mistake: I should have made purchases in my long-term position. I have a much higher tolerance for catching knives in my investment portfolio. As an example, I've been catching The Coca-Cola Company (NYSE: KO) for years, and have done reasonably okay in terms of cost basis and building a position with a goal of generating a nice effective yield down the line. I never got around to adding to my GE investment simply because I was distracted by other ideas, as well as a reluctance to do anything in this market. I'm big into conserving cash these days, as you can imagine. But I was wrong.
Update on GE's price: Just before I was ready to send this in, I saw that the price for a GE share was $10.04. I'd be careful about buying now for a short-term trade. And if that turns out to be wrong, hey, remember that making a bet on a company with huge financial exposure in a world ripped apart by financial crisis, a company whose stock has risen a lot in an extremely short period of time, isn't necessarily prudent advice... in other words, neither you nor I can predict the future...
Disclosure: I own Coke, GE; positions can change without notice.
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Reader Comments (Page 1 of 1)
3-17-2009 @ 6:01PM
Karl Vinsek said...
What a scream. Your article shows Brokers/advisers haven't changed a bit. I have been investing in stocks since 1982. First purchase was Ralston Purina... This dates me.. PIcked by me, against the advice of My Broker. My broker gave me all kinds of advice. It was nearly always wrong.. She adv. me for 6 mos to sell it short, it was going nowhere. So I sold for $3.50 per share, less comm. on my position that was approx 2.00 in the money already. 10 days later, an LBO, bumped the stock up into the $90.00 range My profit when the called it 4 mos later was $1500.00 vs. $12,000.00. My advice to all investors.. Make your own decisions. Never forget the basics.. GE at $10.00 per share has a PE of 8.5. Air craft engines, a major business is growing, what will happen if ever we get the bug for electric cars? who makes Electirc engines?
3-18-2009 @ 7:05PM
Sheldon L said...
Steve,
GE is a buy for anyone looking out farther than 2009....and I have been buying... and I am considering buying more... and I sold naked puts at Jan 2011 strike price $2.50 and took the 21% return offered by those that have lost all sight of reason...and I posted on it.
;-)