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General Electric (GE) used to be a blue chip. Well, I suppose you could argue it still is one, but you have to admit it hasn't acted like one for a while. Remember when the stock hit a single-digit, multi-year low last year? That was painful, especially to someone who owned a long-term position in the business. Like myself.
Besides owning a long-term position, I tried trading the company during the economic crisis. I didn't succeed; I eventually sold the short-term position at a loss, as I mentioned in this piece. But I still hold my long-term shares. And if you haven't been reading the financial news lately, you've missed all the articles about the industrial conglomerate. Looks like everyone is talking about GE, specifically about its potential to come back in the next year or so.
Here's one such article over at Forbes. And here's another over at SeekingAlpha. The latter discusses what is most likely the salient driver of GE's recent positive price action: the possibility of a dividend increase next year. Oh, and to the author of the SeekingAlpha item, let me say, yes, I am kicking myself for selling my short-term shares too early (then again, if a short-term trade doesn't work out, then, by definition, you're supposed to unwind the trade and admit the mistake as early as possible; still, I'm sure everyone knows what I mean).
Anyway, I myself do believe that next year will see a dividend increase. And if that's the case, then you've got to call GE an equity that should be given some due diligence by investors. As for the traders, it could be time for them to check out the shares, too. The volume has been excellent in recent sessions, the stock is near a 52-week high, and it seems to me that GE could hit $20 within a couple months.
But I've been wrong on this company before, so don't take this trading idea without doing your own research. GE is probably better for longer-term thinkers. However, if I do decide to buy the stock again, I will most likely buy with an eye toward selling covered calls along the way.
No matter what, though, you've got to be looking at GE, as it simply has become too interesting to ignore.
Disclosure: I own GE; positions can change without notice.
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Reader Comments (Page 1 of 1)
3-18-2010 @ 5:48PM
john said...
GE has a $100-plus billion block of debt to repay or roll over in 2011 and 2012.
This company's paying close to $17 billion a year in debt service on a total of over $500 billion in debt, which is equal to an interest rate of about 3.3%. It had about $12 billion in earnings after expenses last year. When GE's debt service cost rises, they are in deep trouble. Think GM here...
Run, don't walk, the other way...
4-13-2010 @ 10:26PM
jschroeder said...
read the proxy statements to see what a great job the current directors say management did to deserve multimillion dollar paychecks while they have left the shareholders with values that haven't been see since the mid 1990's. if they really wanted to align management with stock holders the pay would reflect the decimation in value we have seen in the past several years and they would only see substantial gains when the stock has recovered