I believe the logic to be very sound. If I am going to buy individual stocks, I have to make assumptions about what the true value of the company should be. Additionally, you need to be able to protect yourself from a stock falling to zero.
I will give the case of Bank of America. Suppose you had invested your entire retirement on the strength of their dividends. If the company was strong and trading at $50 the stock should not fall by eighty percent in the next year. Indeed if the dividend was stable as I believed, then the stock should trade near the 40-50 dollar mark or perhaps even rise. The fact the stock sinks below that is a gigantic indicator that the logic is faulty and the facts should be looked at closer. Doubling down on margin because the stock is so cheap would not be a good idea.
The most important part of being an individual stock owner in my opinion is not being too proud about a selection and to have anticipations of what may happen to the stock.
IN GE's case they have a very large cache of loans on their books, I am assuming there will be no more than 10-20 million of additional losses. However, I also know from corporate dealings, that if the losses are much greater than that, then accounting folks at GE and management will begin leak word to their family and friends and everyone will stop buying the stock and sell what they have, causing the price to fall further. If GE was actually about done with the writeoffs, insiders would recognize this stop selling and start buying and the price will rise, which I would much prefer. A loss of 60 Billion dollars of market cap is not just a small fluctuation for a company so closely followed as GE.
If GE is going to recover, whether I buy at $5 or $10 will not really matter as the stock should eventually recover back up to the 20's or 30's. If the dividend stays intact or is only cut 50%, I dont' need to make every dollar, but I prefer to make dollars and avoid losses. The tough part is if the stock was bought at $10 and fell to $5 and you sold and subsequently rose to $12, could you not be so prideful that you would admit selling at $5 was wrong and buy back? You need to be able to do that as well as sell at a loss to be successful with individual stocks, because unlike funds they can go to zero. But you need to have this plan when you originally purchase the stock, otherwise you will just flounder with your portfolio.