GE Showing Some Bad mojo

[clifp]

I sold my GE position in Dec for tax purposes and was going to buy more at 15. Fortunately/unfortunately I've run out of cash. I would think it is in the too big to fail category but who knows at this point. On every conventional measurement from P/E to balance sheet strength, to Price to Book value, to dividend yield the stock looks cheap.

On the other hand who knows (including possibly GE Management) what troubles reside in GE Capital immense operations. I think I may write some puts at $10 the June contracts are trading at $1.50 making my basis $8.50 if they get exercised.

[laurence]

Phew, at these prices my trading button finger is starting to twitch. I could buy 700+ shares with my play account. GE is now around 1/4 it's highs, I can't imagine it won't test those highs in the next ten years, and all the while paying a dividend...I own no individual stocks right now but might be putting my toe in.

[ERD50]

Quote:

Originally Posted by clifp On every conventional measurement from P/E to balance sheet strength, to Price to Book value, to dividend yield the stock looks cheap.

One thing bothers me. $130B in market cap, but over $500B in debt. So it seems to me that @ ~ $12/share, you are buying the confidence that GE can keep making money at a higher rate than the cost of its debt.

Which they may be able to do. But I'm not sure how any of us would determine that from the conventional measures. I think it takes a better knowledge of just how they are utilizing that debt to make money.

Just my view of it, I really, really don't know.

But that is why I posted recently about Intel. They have about 5x the cash as debt, so that is at least one variable out of the equation. Amazingly, AAPL has surpassed MSFT in cash holdings.


-ERD50

[FinanceDude]

Quote:

Originally Posted by ERD50 One thing bothers me. $130B in market cap, but over $500B in debt. So it seems to me that @ ~ $12/share, you are buying the confidence that GE can keep making money at a higher rate than the cost of its debt. Which they may be able to do. But I'm not sure how any of us would determine that from the conventional measures. I think it takes a better knowledge of just how they are utilizing that debt to make money. Just my view of it, I really, really don't know. But that is why I posted recently about Intel. They have about 5x the cash as debt, so that is at least one variable out of the equation. Amazingly, AAPL has surpassed MSFT in cash holdings.-ERD50

GE will do anything they can to keep their AAA rating, not that we can trust the rating agencies anymore. However, the folks that price GE's debt when they want a new bond issue are watching thing like a hawk.

GE will be ok as long as they can keep borrowing..........sounds a lot like any big company, hey??

[ERD50]

Quote:

Originally Posted by FinanceDude GE will be ok as long as they can keep borrowing..........sounds a lot like any big company, hey??

Heck, I'll be OK as long as I can keep borrowing!

-ERD50

[haha]

Cut to AA+ with stable outlook.

Wall Street rallies on hopes of relief for banks: Associated Press Business News - MSN Money


Ha

[clifp]

I am not sure what worries me more, that GE stock was up 11% on news of them losing their long cherished, and much bragged about AAA rating, or that I understand why the stock went up.

[FIRE'd@51]

I think the market was relieved that the cut was only one notch. There had been some speculation that the cut might be a couple more notches to AA- , or possibly even to A+.