General Electric: A Dead Stock

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You hear it time and again form market pundits: Stick with solid well-known names. These are the blue chips you want in your portfolio. As so it is with General Electric (GE), which for decades was an icon of American manufacturing prowess and a darling of smart investors. Perhaps no longer. The former darling has been hovering at or near its 52-week low lately. A recent piece by Chris Fraley in InvestorPlace outlines the case to avoid this former star.

General Electric: The Reality

In his article, Mr. Fraley cites a number of factors that make GE a less-than-compelling investment.

  • Earnings
    Earnings, the lifeblood of healthy businesses, have been disapointing at GE lately, to say the least. Despite some improvement in sales over the last few years, earnings have fallen short of analysts expectations by 23% over the last two quarters according to Mr. Fraley.
  • Not Cheap
    Despite its low price, Mr. Fraley argues that GE is not cheap, even at these depressed prices. It is now trading trading “at more than 13 times forward earnings estimates”, and is more expensive on that basis than some well-known an more high-priced stocks such as Target or Apple.
  • Not in Growth Mode
    Essentially GE is in a search to find itself. The conglomerate is engaged in a major downsizing effort, not the type of action you’d expect from a vibrant and growing business.

Its Just Dullsville with GE

Has GE bottomed out? Is it a value stock ripe for the picking? If so no one is buying.
The current CEO, Mr. John Flannery, appears more to be “shuffling the deck chairs” rather than engaging in real growth.

So much of the times, Investor Place articles suggest to us what to buy. Far less do we read about stocks to avoid. In this refreshingly different article, Mr. Fraley looks at the reality regarding General Electric, and gives us several reasons to be cautious.

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