The GE decision
It seems I am the most resistant to GE as I find their financial exposure hard to fathom. But if the rest of the club is enthused about the US export and emerging market play, then I can join concensus. We should all take some leap of faith at some point.
One thing I have been impressed with is that as a closely followed conglomerate, the market doesn't seem to mind the bad news too much. They release some bad news and some smart analyst comes out and says, "yeah, we baked that into the price", and then the other lemmings.... I mean analysts come out and say "yeah, we knew that too!" And then GE's stock hardly moves (up or down).
I really like the US export play but I cannot think of a better company so maybe that's what we should buy. Are we all agreed to buy GE on weakness?
posted by Junk Bonds @ 12/14/2007 01:43:00 AM
5 Comments:
They are exposed to consumer as well as business financing. According to a recent interview by Immelt they are expecting a 20% decline in their consumer finance earnings for next year. I can't seem to find out what percentage of overall revenues is their consumer exposure. He also mentioned that 40% of GE's earnings came from their infrastructure division. Also half their earnings now comes from overseas.
http://www.msnbc.msn.com/id/22222511/
In terms of their business leasing, they haven't yet had an trouble finding financing and according to this article they don't always syndicate their loans like the banks.
http://www.reuters.com/article/ousiv/idUSN1336416420070913
GE may even stand to benefit as banks retrench, they can extend lending at higher interest rates.
I'm not sure why you're reluctant with GE especially regarding their financial exposure. You seem to think that the worst of the credit mess is over, so in that case GE's finance division shouldn't be a problem. My biggest reservation is that I can't seem to get all the info about GE, but being a conglomerate as big as it is, this isn't suprising.
I like it. It's in all the growing industries like power generation, infrastructure, and water. They consistently deliver above average earnings growth despite being a $400 billion company.
I am fine with GE too. I don't think there is anything wrong with investing in a safe company once in a while!
Also I like the fact that they are one of the major players in renewable sources of energy.
So it seems that we have a consensus. Des do you think you can go ahead with a 100-share order?
Well, I think we can agree to buy GE but we should time a good entry over the next few days and weeks. GE has shown some weakness relative to the S&P Index and since mid-Nov has traded in between the S&P and XLF (if you look at the graph). So the market has clearly priced their financial exposure, despite their reassurances otherwise.
BTW, I didn't say the credit mess is over; you'll have to read and think a bit more carefully about signalling and market expectations.
Sorry about misrepresenting your opinion on the credit mess. Must have been a divine intervention! Or I was thinking back a few posts about investing in US banks trying to catch the bounce.
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