So when does GE become a buy?

[Maurice]

Any opinions here?

Maybe in the immediate aftermath of a downgrade?

 

[Dawg52]

Maybe never?

 

[ziggy29]

My gut reaction would be to say when the dividend is cut, but the problem is that it's hard to get a really good fix on what's in that black box related to their financial operations.

 

[Grep]

Now and then I feel tempted to buy an individual stock such as GE. I then take a moment to add up how much of a stock I already own through mutual funds. Typically, I'm shocked at how big a stake I already have (and hence how much pain GE has cost me, recently), and I conclude that that's certainly enough.

It's amusing, really. When I walk into my local mega-mall, I remind myself that I own thousands of dollars of its value (well, at least of the chain of malls), as well as in most of the stores there. Is McDonalds doing well? I'm so glad. And on and on. I'm almost tempted to follow in a certain someone's footsteps and say "hehehe", but I'll wait until times get better for that!

I do appreciate the temptation to gamble in this way. I'd rather do so with GE than at Vegas. But for now, if the stock doubles, I'll profit to the tune of $20k (or whatever) anyway, through VTSAX and VVIAX, etc.

 

[Gpond]

Holding GE shares? CEO talks about an economic depression

 

[Zathras]

Now and then I feel tempted to buy an individual stock such as GE. I then take a moment to add up how much of a stock I already own through mutual funds.

That is kind of funny, for me, now and then I feel tempted to buy a mutual fund. Then I take a moment to add up how much of the stocks they have that I already own

True, I don't have hundreds of stocks, but I feel 20 or so stocks gives me enough diversification and lower churning of the holdings (as well as complete control over how much is bought and sold) each year.
As for GE, I think it becomes a buy once the financial mess starts to get figured out. If GE can clean up their finance wing, things should be looking very good, long term.

 

[Grep]

That is kind of funny, for me, now and then I feel tempted to buy a mutual fund. Then I take a moment to add up how much of the stocks they have that I already own

That is an amusing comparison. But what you are close to saying is that we're almost in the same boat.

I'm not against holding individual stocks, by the way, and I've seen the studies that holding ~30 stocks provides reasonable diversity. I just don't have the time or energy to do sufficient research. Therefore, my sense is that I'd be buying on the mere hope that a stock is "cheap." In the end, I figure I might as well buy VTI or VBR, etc., when they are "cheap."

I also recognize that a much more concentrated position is the only way to potentially become much richer. It's just that I have far more to lose right now than to gain from those sorts of risks. These last six months have been bad enough!

Cheers.

 

[samclem]

I'm not against holding individual stocks, by the way, and I've seen the studies that holding ~30 stocks provides reasonable diversity.

I've read this, too. Wm Bernstein thinks it ain't so.

To be blunt, if you think that you can do an adequate job of minimizing portfolio risk with 15 or 30 stocks, then you are imperiling your financial future and the future of those who depend on you. The reason is simple: There are critically important dimensions of portfolio risk beyond standard deviation. The most important is so-called Terminal Wealth Dispersion (TWD). In other words, it is quite possible (in fact, as we shall soon see, quite easy) to put together a 15-stock or 30-stock portfolio with a very low SD, but whose lousy returns will put you in the poorhouse.

He echoes your observations on "concentrated positions" as well"

a grossly disproportionate fraction of the total return [of the S&P 500] came from a very few "superstocks" like Dell Computer, which increased in value over 550 times. If you didn’t have one of the half-dozen or so of these in your portfolio, then you badly lagged the market. (The odds of owing one of the 10 superstocks are approximately one in six.) Of course, by owning only 15 stocks you also increase your chances of becoming fabulously rich. But unfortunately, in investing, it is all too often true that the same things that maximize your chances of getting rich also maximize your chances of getting poor.

He makes the case here. Interesting reading as always from Bernstein.

 

[ladelfina]

When turds like Welch and Immelt seem sympathetic?

 

[CyclingInvestor]

I have followed GE for some time. I sold out last year (the last of my financial stocks) when they (along with pretty much all other financials) lost the ability to figure the value of their portfolios.

I try to own stocks that can sustain relatively predictable growth (PG, KO, JNJ, SYY, etc) over long periods of time. It will take a number of years of solid growth and clean balance sheets before I own stocks such as GE, AIG, C, BAC etc again.

 

[FIRE'd@51]

When turds like Welch and Immelt seem sympathetic?

So typical of your posts, ladelfina - heavy on the name-calling and light on the analysis.

 

[saluki9]

When turds like Welch and Immelt seem sympathetic?

To what? The fact that they have been in the same boat as all the other shareholders? That they have lost a large percentage of their net worth from the decline in GE stock. That Jack Welch has held his GE stock despite being under no contractual obligation to do so.

BTW: As for the original question. The time to buy GE stock is right about the time that the group consensus is that we're never coming out this, GE is a has been, that their finance arm will ruin the company,etc.

 

[Maurice]

Saluki - sounds like you're saying 'now-ish'.

 

[Running_Man]

a grossly disproportionate fraction of the total return [of the S&P 500] came from a very few "superstocks" like Dell Computer, which increased in value over 550 times. If you didn’t have one of the half-dozen or so of these in your portfolio, then you badly lagged the market. (The odds of owing one of the 10 superstocks are approximately one in six.) Of course, by owning only 15 stocks you also increase your chances of becoming fabulously rich. But unfortunately, in investing, it is all too often true that the same things that maximize your chances of getting rich also maximize your chances of getting poor.

I must not be understanding something here. If I am selecting at random 15 stocks from a 500 stock universe and 10 of them become superstars, would the odds of not selecting one be 490/500 +489/500 .....to 476/500? resulting in a 59.4% chance of not selecting one or better stated a 2 in 5 chance of selecting a superstock with a 15 stock portfolio not a one in six chance? Of course he at the same time referred to superstocks as about 1/2 dozen and then put a number of 10 on them.

And he used the results based on stocks in 1999 in the index and not one in the index 10 years prior at the start of the period and proposed with out any testing that the results would have been even worse for his selection of random stock portfolio's. But logic would dictate that a portfolio of random S&P500 stocks which contained a stock dropped from the index would get another random selection to replace it, increasing the odds of owning one of the "super stocks" not lowering the odds.

 

[Gardnr]

I sure don't know, that's for sure. That thing's still a falling knife. Plenty have been cut by it and it's not acting very well right now, is it?

I'd sure be waiting quite some time to see where it stabilizes. Of course it could spike up a bit from here before doing so, but who knows. There may be more downside surprises. The market clearly doesn't know yet just how to value this company.

Not very helpful, I know. It could be one of those good long term plays, but it still feels very speculative to me.

 

[FIRE'd@51]

If I am selecting at random 15 stocks from a 500 stock universe and 10 of them become superstars, would the odds of not selecting one be 490/500 +489/500 .....to 476/500? resulting in a 59.4% chance of not selecting one or better stated a 2 in 5 chance of selecting a superstock with a 15 stock portfolio

Assuming you are not replacing a stock once it's drawn, I think the odds of not drawing one would be 490/500 x 489/499 ............. 476/486, which equal 73.5%. Thus, the odds of selecting a superstock would be 26.5%.

Even if you allowed replacing, the odds of not drawing a superstock would be (490/500)^15 = 73.9%.

 

[FIRE'd@51]

Saluki - sounds like you're saying 'now-ish'.

Analysts' average earnings estimate for GE is 1.27 for 2009 and 1.34 for 2010. According to a Bloomberg article on another GE thread started by Dex, the average payout ratio of GE from 1994-2008 was 50%. Applying that payout ratio to the earnings estimates would give a dividend of 0.64 in 2009 and 0.67 for 2010. This would be approximately a 50% cut in dividend, which according to the above-cited article is what the options market is projecting. At a price of 11, this would translate into a yield of 5.8%, about twice that of the S&P 500, which makes GE look attractive (to me, anyway) at these levels.

 

[SingleMomDreamer]

Try APWR instead

Instead of going for GE, look at where they've put their money. Try APWR at about $5/share - China wind power. Play long.

 

[unclemick]

I've read this, too. Wm Bernstein thinks it ain't so.



He echoes your observations on "concentrated positions" as well"



He makes the case here. Interesting reading as always from Bernstein.

Yep - I've reread the article many a time over the years - and then take the bet - with a few good stocks - only as a hobby mind you.

I have stopped buying a quick pick Powerball when I gas up.

heh heh heh - I also read Tweedy Browne about high yield stocks.

It's the hormones and incurable - but with my balanced index I do sort of keep it under control. .

 

[Running_Man]

Assuming you are not replacing a stock once it's drawn, I think the odds of not drawing one would be 490/500 x 489/499 ............. 476/486, which equal 73.5%. Thus, the odds of selecting a superstock would be 26.5%.

Even if you allowed replacing, the odds of not drawing a superstock would be (490/500)^15 = 73.9%.

Yes I agree with your numbers I should have subtracted from the 500. So the answer is one in four not one in 5...

 

[Nords]

I think the best time to buy GE would be right after the dividend cut. Reading Immelt's comments it seems to be a matter of "when", not "if", and right now they can't afford any surprises or anything less than flawless execution.

So typical of your posts, ladelfina - heavy on the name-calling and light on the analysis.

... and perhaps on your "Ignore Poster" list as well. No need to be critical of posts that lack analysis-- nothing there to be critical of.

 

[SinCityGrrrl1]

Me, I buy every month as I'm in the S&SP and have watched my little nest egg go down down down. But I'm trying to look on the bright side that I'm buying more stock for my money. I used to get about 25 stocks a month, now I get about 85 a month. Hopefully by the time I retire in 8 or 9 years the stocks will be up at a reasonable price.

 

[al_bundy]

GE hits the price of a venti caramel machiatto and i might buy some

 

[ziggy29]

GE hits the price of a venti caramel machiatto and i might buy some

Per share or for the entire company?

 

[al_bundy]

most times i'd say per share, but the stories i'm reading about eastern europe and other developing nations are pretty bad