I already have some of those. There are times to buy certain blue chips instead of waiting. When GE goes back to $20 or so, it will attract buyers. I have plenty of PG, TYC, BP, JNJ, PFE, CPB, MMM, AAPL, etc.
I assume you already have some GE too, so I guess I don't see why you would chose to buy more of it over the others. The good part of GE is its industrial operations and those are similar in profitability and diversity to UTX, ITW, MMM, EMR, etc. Those companies are selling just as cheaply and their businesses have prospects that are at least as good as GE (all of them have more favorable earnings comparison forecasts for 2009 than does GE). However, GE has the finance side which could, at worst, blow it up or at best, will be an underperforming drag on operations for the near future.
FWIW, I've been a GE shareholder since 1991 so I've followed it pretty closely for near two decades now . . . and I sold 75% of it in the spring and summer this year. Not a decision I made lightly since I've had it so long but getting out of a financial industrial company into the other low debt industrial companies seemed wise to me at the time. We'll see how it pans out by 2025 . . .
When you have to borrow capital at 13%+ (when you count the redemption fee they are paying Buffett) you have problems. Especially following on the heels of all of those years of huge profits -- in retrospect it's easy to see that smart management should have saved some of that capital for a rainy day instead of blowing all the excess on stock buybacks. FWIW, in just 2007 and 2008 GE spent $17.4B repurchasing stock. While some of that was from business unit sales and I don't expect them to have forseen the magnitude of current problems, it's pretty bad to have spent $17B in the previous eighteen months repurchasing your stock at high prices and then have to turn around and borrow $10B on horrible terms.
I don't mean to be negative. I'm still a GE shareholder and I don't think they will collapse, I just think there are less risky opportunities that offer the same or better returns (especially in light of the pricing in the debt markets recently). If I wasn't mildly emotionally attached to my GE after two decades I probably would have sold it all.
FWIW, for a good chuckle from the 2007 Annual Report:
"In 2008, we should hit all of our financial goals and outperform the S&P 500. Our revenues should grow by at least 10% to $195 billion, with organic revenue growth at 2 to 3 times GDP growth. Our earnings per share should grow by at least 10%. Our return on average total capital (ROTC) should near our target of 20%. We expect to return $18 billion to our investors through the dividend and stock buyback."
"We have the discipline and the processes to win in this tough environment. We are in the fifth year of a successful organic growth initiative that is delivering results. More than half of our revenues are outside the U.S., and our global revenue growth was 22% in 2007. We have $150 billion of Infrastructure products and services in backlog. We have strict risk discipline, and as a result, have no exposure to losses from Collateralized Debt Obligations (CDOs) and Structured Investment Vehicles (SIVs). We have retained a “Triple-A”-rated balance sheet and generate substantial cash flow, so we can invest while others pull back."
