WTF GE?

[David in MN]

Remember General Electric the industrial, financial, technology (ah, there we go) powerhouse? What happened to this company? In the past decade it has gone from being a company that relied on legacy industry to a failed mortgage company to a company that now buys up commercial space to remind us that they are the global experts in running efficient companies. Never mind that their commercials look suspiciously like the "we ask the tough questions" Enron commercials from the early 2000s...

And they've opted to cozy up to politics rather than out-compete. Jeff Immelt split his time as CEO with being the chair of the President's Council on Jobs and Competitiveness (whatever that was). But it kept Immelt busy at the White House rather than in his boardroom as GE's stock tumbled to $6.

The board, being self motivated idiots, began buying shares that were under book value (meaning you could sell all of GE's assets and properties and get more than $6 per share) in what a layman might call insider trading. Of course everyone paying attention saw this and bought shares and options and got rich (me included).

Since then they've spun off the financial dead weight, tried to position themselves as a Chinese train company, and now some kind of integrated tech guru group. And the market just lets this slide because it's a legacy brand. Then today they release numbers that their net earnings fell 45% y/y.  The only bright spot was their "Power Generation" business at just over $2b. OK. Then they had the guile to predict a better 2017 on the grounds that the overall economy will improve. I guess a strong enough tail wind will move this lead zeppelin.

This is a widely held stock and a traditionally reliable dividend. You probably own it somewhere. But I look at it like a house of cards that minimally needs to be broken up so individual business units can succeed or fail. Of course I could be all wet.

This is not financial advice. I consider myself "fake news".

[Pathfinder]

But I look at it like a house of cards...

That right there pretty much describes the entire stock market these days, not to mention fiat cash and, oh, BTW, our entire economy.

Speaking of which, I'm just curious as to what "IEDs" bho is leaving behind him to ensure the economy tanks right and proper, and hedge fund butt-wipes like Soros can (a) make even more money, and (b) complete the destruction of the US economy once and for all!   

[bigbear]

This is a widely held stock and a traditionally reliable dividend. You probably own it somewhere. But I look at it like a house of cards that minimally needs to be broken up so individual business units can succeed or fail.

Some version of the 'GE should spin off X, Y, and/or Z' call has been around for years/decades.  It's been a lumbering zombie for quite a while.  The Dow and S&P are both well beyond the 07/08 peaks, yet GE is still down.

Simple comparison chart of GE, Dow, and S&P...
http://finance.yahoo.com/chart/GE#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%3D

Quite the breadth of business.
https://en.wikipedia.org/wiki/List_of_assets_owned_by_General_Electric

Maybe they used this release to do a bunch of write-offs, etc. to reset the books and move forward?  Or maybe they have their head in the sand?   

[David in MN]

Alas, new CEO who promises job cuts and new efficiencies. Time for me to buy? Nope. Still looks gangrenous.

[mountainmoma]

My solar panels, bought almost 19years ago were made by Astropower, which was doing well, built  new production facilit ( so maybe overextended themselves ? ) somehow survived the initial phase of the early 2000's small bubble popping, but went bankrupt  -- and was bought by GE. I know this because it I owned stock in it. GE bought their assets, paid something to someone, we got nothing, of course. But, I also never saw GE market solar panels. Games and more games.

[Tyler Durden]

The majority of Locomotives pulling trains around right now are GE.  Some are good, some are bad, but that's what's out there.  Most of the signal technology on railroads is manufactured by GE as well. They have a near-monopoly on equipment in that industry.

My wife worked at a water technology place back in Minnetonka, MN called Osmonics.  It was a local, homegrown company that was a pioneer in reverse-osmosis water purification.  GE took it over around 2002 I believe; cut and offshored many of the jobs, and it became another sucky place to work. They recently sold that division off to some foreign company.

I hate GE.

[David in MN]

I don't love or hate any business per se. Any business is a group of people capable of doing good or bad and turning in either direction with good planning and management of resources. I just look at GE as a bloated dinosaur trying to do business primarily with set in stone government contracts (like rail and power) while continually rebranding to the public what it really does.

Instead of marketing as an efficiency company and competing with Microsoft, IBM, SAP, etc. they need to focus on what they're good at.

[Smurf Hunter]

All this and Jeff Immelt didn't get to the Uber CEO gig a few weeks back.

https://techcrunch.com/2017/08/27/jeff-immelt-says-hes-not-going-to-be-the-ceo-of-uber/

[David in MN]

Peter Schiff called GE (as best I recall) "a hedge fund masquerading as a real company". Couldn't agree more.

[Special K]

The majority of Locomotives pulling trains around right now are GE.  Some are good, some are bad, but that's what's out there.  Most of the signal technology on railroads is manufactured by GE as well. They have a near-monopoly on equipment in that industry.

Hold on to your throttle handle...

https://www.bloomberg.com/news/articles/2017-10-26/ge-mulls-options-for-locomotive-unit-including-a-sale-wsj-says

General Electric Co. is studying an exit from its locomotive business, one of the 125-year-old company’s oldest operations, the Wall Street Journal reported.

The Boston-based company is studying options such as bringing in a partner, spinning the division off or selling it, the newspaper reported, citing people familiar with the matter. GE is also considering the divestiture of its health-care information technology business, Reuters reported.

[David in MN]

And today they cut the dividend by 50%. Not a big surprise but what an embarrassment.

I hope this thread has helped people avoid this train wreck.

[Special K]

Annnd the locomotive derailed...

http://trn.trains.com/news/news-wire/2017/11/13-ge-seeks-to-sells-locomotive-building-business

CHICAGO – General Electric announced plans on Monday to focus on three core industries – aviation, power, and healthcare – leading to the sale of its GE Transportation division and its locomotive product line within two years, the Chicago Tribune reports.

“Today, GE announced that it will divest the Transportation business from its portfolio. The Company is in the early stages of this process and exploring a multitude of possibilities that may include, among several options, creative approaches used to transition GE’s Consumer Finance business into Synchrony Financial or models like the Baker Hughes and GE Oil & Gas merger," spokesman Tim Bader tells Trains News Wire. "This move is in line with GE’s broader efforts to divest $20 billion in assets over the next few years. The Transportation business remains committed to building on its strong culture of innovation, deep domain, world-class technology and digital solutions in a way that best positions the business for growth.”

[David in MN]

Top it all off with a board reduction and layoffs at the home office.

The whispers are audible: maybe a limited time left in the DJIA. What will de-listing do to the price?

Jan. 20, when I started this thread, GE was ~$30.50. Today it hovers around $19 with half the dividend and talk of leaving the Dow. And I still wouldn't buy.

[bigbear]

Catching a "falling knife" is tough...  For capital intensive (cash expensive) industries, one measure is looking at the share price compared to the book value per share.  If there's a big difference, there may still be some risk in the stock.  If the book value is greater than the share price, then (in theory) the company is worth more if it just shut the doors and sold its assets.  But that's not what businesses do.  They are around to create revenues for the business (and ultimately the shareholder).  Shareholders and potential investors in the market project income into the future and price that into today's dollars.  If you expect more revenues, then the share price will be higher compared to the book value.  Which brings us to GE...

https://finance.yahoo.com/quote/GE/key-statistics?p=GE

GE is currently trading at $17.60ish.  And Yahoo has the book value per share at $8.77.  Which basically means that if the company simply sold off assets (no revenues from work/investments), GE would be worth $8.77 per share.  So 50% of the stock value is essentially a salvage.  And 50% is projected income.  It's battered and bruised.  The Price/Book ratio for GE is 2.01.

Compared to another capital intensive company (like Union Pacific).  Share price is $129.  Book value is $24.  Giving a Price/Book of 5.4ish.    Honeywell and Caterpillar are both in this ballpark.  Danaher (car part mfg) is about 2.5ish.  And it's share price has more than doubled over the last 5 years.

I'm still not buying because the profit margins are out of line (6% compared to 12-13%).  But if the share price drops under $13 or the profit margins go up significantly, then I think you're in the buy territory (if you're a conglomerate industrial-type). I wouldn't be shocked if it continues its slide down until the 4Q results are in (end of Jan).

(insert all disclosures/risks/jargon/get out of jail cards...  enter are your own risk...)

[bigbear]

Saw this article and though of this thread...

https://finance.yahoo.com/news/worst-company-2017-according-yahoo-finance-readers-153957843.html

GE voted worst company of 2017 by Yahoo Finance readers by a wide margin. 

1.General Electric (GE) 25.9%
2.Equifax (EFX) 6.5% (about a dozen readers thought Experian was the worst, but listed Equifax’s misdeeds.)
3.Sears (SHLD) 3.9%
4.Wells Fargo (WFC) 2.5%
5.Comcast (CMCSA) 2.5%
6. Uber 2.3%
7. Yahoo 2.0%
8. Under Armour (UAA) 1.4%

Sounds like popular sentiment is as bad as it can get. 

Can anything give them Street cred at this point?

[David in MN]

Saw this article and though of this thread...

https://finance.yahoo.com/news/worst-company-2017-according-yahoo-finance-readers-153957843.html

GE voted worst company of 2017 by Yahoo Finance readers by a wide margin. 

1.General Electric (GE) 25.9%
2.Equifax (EFX) 6.5% (about a dozen readers thought Experian was the worst, but listed Equifax’s misdeeds.)
3.Sears (SHLD) 3.9%
4.Wells Fargo (WFC) 2.5%
5.Comcast (CMCSA) 2.5%
6. Uber 2.3%
7. Yahoo 2.0%
8. Under Armour (UAA) 1.4%

Sounds like popular sentiment is as bad as it can get. 

Can anything give them Street cred at this point?

GE came in more hated than a mail order company going out of business because of a a mail order company, a data reporter that doesn't keep data secure, a bank caught falsifying accounts, and a garbage run monopoly. That's priceless.

[Smurf Hunter]

I tried and failed, with Under Armor.  The whole world hated them, their stock tanked and I thought the market would get over it.  Nope.  I exited with a 18% loss and a lesson learned.

[bigbear]

https://www.reuters.com/article/us-ge-results/sec-investigating-ge-charge-company-posts-10-billion-loss-idUSKBN1FD1IC 

$6.2 billion charge to increase insurance reserves, among other declines in profit.

GE said the probe by the U.S. Securities and Exchange Commission began in late November and initially focused on long-term service agreements for maintenance of power plants, jet engines and other industrial equipment.

It said on Wednesday that the SEC recently expanded the inquiry to include the $6.2 billion charge and $15 billion more in provisions for insurance policies that GE announced last week.

[David in MN]

Never mind that their commercials look suspiciously like the "we ask the tough questions" Enron commercials from the early 2000s...

Didn't know how close I was to the truth. It now does look like Enron as it once again shatters through support (sorry for the trading lingo). I've been doing the numbers and I'm not convinced that as an entity it can be split up. The contracts and retirements are a giant spiderweb.

They've all but halted advertising and seem like they are restructuring every two weeks in attempt to sail between Scylla and Charybdis with a Damocletian sword tied to the mast.

[Mr. Bill]

Bloomberg, 2/1/18: How GE Went From American Icon to Astonishing Mess

[iam4liberty]

https://www.cnbc.com/amp/2018/06/19/walgreens-replacing-ge-on-the-dow.html

GE booted from the Dow, to be replaced by Walgreens

Reminds me of American Pie.

Bye, bye Miss American Pie
Drove my Chevy to the levee but the levee was dry
Them good ole boys were drinking whiskey and rye
Singin' this'll be the day that I die
This'll be the day that I die

[David in MN]

https://www.cnbc.com/amp/2018/06/19/walgreens-replacing-ge-on-the-dow.html

GE booted from the Dow, to be replaced by Walgreens

Reminds me of American Pie.

Bye, bye Miss American Pie
Drove my Chevy to the levee but the levee was dry
Them good ole boys were drinking whiskey and rye
Singin' this'll be the day that I die
This'll be the day that I die

Too funny. I immediately thought of the lyrics of Bad Company. De-listed and under $13... If it didn't hurt so many employees and retirement funds it would be a better joke. I take no pleasure in watching an iconic brand commit suicide. I guess I can take solace in the fact that I raised the warning flag.

[David in MN]

Flannery's out. New CEO, new dream. Don't click unless you really want to read; Bloomberg is horrible with auto play nonsense.

https://www.bloomberg.com/news/articles/2018-10-01/ge-s-500-000-000-000-market-wipeout-is-like-erasing-facebook?utm_source=yahoo&utm_medium=bd&utm_campaign=headline&cmpId=yhoo.headline&yptr=yahoo

There's no pleasure to be had here. Juggling CEOs looks like a last desperate act. $11 per share. Yikes. I just hope whatever transition needs to happen does so without hurting too many employees. It's going to make for a really dark book someday.

[scoop]

GE shares soar after company suddenly dumps John Flannery as CEO. Former Danaher CEO Lawrence Culp as his successor.

When your stock is in the dumps, I suppose anything looks like it's soaring.
7.1 percent higher at $12.09 a share.

https://www.cnbc.com/2018/10/01/ge-removes-flannery-as-ceo-takes-23-billion-non-cash-charge-for-power-business-problems-and-withdraws-guidance.html

[bigbear]

I'm still not buying because the profit margins are out of line (6% compared to 12-13%).  But if the share price drops under $13 or the profit margins go up significantly, then I think you're in the buy territory (if you're a conglomerate industrial-type). I wouldn't be shocked if it continues its slide down until the 4Q results are in (end of Jan).

I still haven't bought any yet...  (I guess fortunately at this point.)  GE broke the $13 mark on the down side and kept going.  They have cut divs and have taken a 'good will' hit (basically saying their brand isn't worth as much as it once was).  It's now around $10/share.  We're back around where it was right after the 2009 crash.  Prior to that, the last time it was this low was in 1995.  I'd argue that the bubble burst in 2009 and free money is what buoyed the stock since then.  As rates creep up, the wheat and chaff will separate. 

I looked up institutional ownership.  There are a few big boys that have a net sell since their last filing (Blackrock, Franklin, Capital Research) and a few seem to be upping their ownership (FMR, Fidelity, Harris).  I have to imagine a lot of the mutual funds/pensions have already shifted their allocation away from GE if they had wanted to do so and the buyers are value shopping at this point. 

http://investors.morningstar.com/ownership/shareholders-major.html?t=GE

Conflicted...   

[bigbear]

https://www.marketwatch.com/story/ge-stock-price-target-slashed-to-6-from-10-by-jpmorgan-lowest-of-wall-street-analysts-2018-11-09?siteid=yhoof2&yptr=yahoo

JP Morgan cut their target price for GE to $6/share.  And they seem to think even that's generous. 

[David in MN]

GE is currently trading at $17.60ish.  And Yahoo has the book value per share at $8.77. 

JP Morgan cut their target price for GE to $6/share.  And they seem to think even that's generous. 

Um...Since you and I seem to think the same way the current price of $7.73 is either too high or too low. But if book is correct (and I really haven't done the work) who would buy it? Would GE be a division of Siemens?

I found an interesting article about how the healthcare side of the financial division is the nagging debt...
https://www.bostonglobe.com/business/2018/11/28/the-billion-money-pit-dragging-general-electric-down/mXSUIIeLEZd8TsgCYstTTO/story.html

I covered my short (I know it's not nice to talk about shorts) and if I met Immelt I don't know if I'd deck him for ruining so many lives or shake his hand for the money he made me. Maybe both.

[ttubravesrock]

I tried and failed, with Under Armor.  The whole world hated them, their stock tanked and I thought the market would get over it.  Nope.  I exited with a 18% loss and a lesson learned.

UA has almost doubled since your post... Sometimes it's worth waiting!

[David in MN]

The dividend has been cut to a penny.

https://www.cnbc.com/2018/12/07/ge-makes-it-official-lowers-dividend-to-a-penny.html

Granted that's quarterly so they have room to drop more...

Oh, dear.

[scoop]

Here is a story of how one of America's industrial behemoths fell on hard times.

https://www.linkedin.com/feed/news/the-fall-of-an-american-icon-4508044/