GE's Immelt Buys Shares - Should You?

Investors in Dow component General Electric (NYSE: GE) finally had some semblance of good news Thursday, as Jeffrey Immelt, CEO and Chairman of GE, bought $820,000 worth of stock on the open market. In addition, GE’s Vice Chairman Michael Neal purchased $750,000 worth.

Though these purchases are relatively small compared to the wealth of these two men, it’s an important first step in the long recovery process that GE investors have been waiting for. It goes quite nicely with Warren Buffett’s purchase of $3 billion worth of GE preferred stock.

Does this mean the dividend is safe? I wouldn’t bet on it. Does this mean it’s time to get in? Again, I don’t believe so. I’m sticking to my belief that we won’t find a true bottom for stocks until late summer (July or August) of 2009.

If you really think GE stock is not going to get any lower, you can always buy some now and average down if you just happen to be wrong.

Disclosure: No positions

Comments

[malach hamo...:]

based on Inmelt's track record in running the company, his purchase of its stock is little consolation. Remember, Warren Buffet made a big purchase at 21.50!!

2008 Nov 14 06:37 AM

[captainccs:]

Aubrey K. McClendon bought shares of his company and he lost his whole position in a margin call:

Chesapeake Energy CEO gets margin call; sells entire stake

www.bloggingstocks.com.../

Maybe by following GE's CEO you too can lose it all, maybe not. They are no better at predicting the future than the next fellow, insider info or not.

2008 Nov 14 08:10 AM

[GregT:]

Immelt also bought shares when they were such a good value in the low 30's. Not only was his past purchase a dumb move from an investing perspective, it was also a terribly stupid move considering that GE would be missing earnings estimates shortly after his purchase. To put it in simple terms, it shows that even the CEO of the company has no idea how well or poorly the company is doing.

Just consider that GE has stopped raising it's dividend for the first time in over 30 years. Consider that GE had to pay Buffett 10% to borrow money. Is that the kind of rate that a real AAA rated company should be paying?

The main theme over the past year has always been that things turn out worse than they appear. GE has continued to surprise on the downside with both earnings and news.

Trying to guess when these surprises will end is simply a gamble.

2008 Nov 14 08:26 AM

[sumosama:]

How can an investing company have no positions???

SA really needs to take a look at disclosure rules.

2008 Nov 14 11:27 AM

[Marc Gerstein:]

Actually, the no-positions disclosure means no positions in GE. That seems consistent with the author's remarks: "Does this mean it’s time to get in? Again, I don’t believe so."

I take issue with the author's point-of-view: an ambiguous suggestion (or non-suggestion, depending on how you want to read it) that readers may want to consider GE when the author himself clearly thinks it's not a buy. But for what it's worth, there seems to be no problem regarding compliance with the disclosure rules.


On Nov 14 11:27 AM sumosama wrote:

> How can an investing company have no positions???
>
> SA really needs to take a look at disclosure rules.

2008 Nov 14 11:39 AM

[Jack Welsh:]

Immelt and Neal (head of GE Capital) purchasing more shares is a meaningless indicator. These two a'holes bought much larger positions back in late May/early June when the stock was nearly double the current price. Since then GE has traded down, down, down. What'

Immelt's leadership has been an utter disaster: WMC was a terrible investment; he waited to sell appliances to the point where nobody wanted it; management didn't recognize the "canary in the coal mine" that was WMC and is now trying to offload subprime credit card receivables when there's nobody who wants that exposure or can afford that exposure.

Investing in this company should be avoided. If Immelt says three weeks before Q1 end the quarter is in the bag and the company still misses, how can you expect him to really know what's going on across a sprawling, mismanaged hairball like GE?

2008 Nov 14 01:30 PM

[Ryan:]

Marc,

You're exactly right; I do not have any position in GE, nor do any of my clients (or Freund Investing itself). Thanks for clarifying.

As for the point-of-view, I personally feel that GE will go lower, but I also realize that I could be wrong, and that I can see an argument for thinking this is the bottom. I'm simply suggesting that if investors do decide to jump in, they might want to consider not going all-in.

Thanks for the comments everyone.

Ryan Freund
Managing Member
Freund Investing, LLC

2008 Nov 14 02:22 PM

[kurt walter:]

GE Capital begging for taxpayer bailout money. Not a good sign for GE. How come Buffett gets GE preferred at 10% and investors weren't given the same opportunity? Instead, they want taxpayer money. All of these companies need to dilute shareholders with common and preferred shares offered to investors, who will take the risk/reward. Going to the taxpayer is not right.

2008 Nov 14 02:27 PM

[drbob66:]

C'mon people...GE bottomed out at 14.58 on Nov. 13 (You heard it here first). Bought some at 14.84 (my stop wasn't low enough after all!)...the risk-reward was just too good to pass up. They'll pay the dividend through 2009...but I expect a nice bounce to 18 or 19 within a few months (at which point I'll unload my shares).

2008 Nov 14 08:11 PM

[jepittman:]

GE has suspended its stock buyback and dividend hikes because the credit markets locked up and the future became more unpredictable. It was a prudent management decision. These managers are smart but they are not clairvoyant. Both will be resumed when the crisis abates. I own GE through mutual fund investments and ETFs. If you believe this will all pass then mr market is offering up a nice bargain.

2008 Nov 16 12:41 PM

[Not A Stupi...:]

Is GE Interest Plus safe?

2008 Nov 16 10:48 PM