# Why Investors Should Consider GE A Good Short Sale Candidate

General Electric (NYSE:GE) is a laggard during this intermediate-term advance. The firm's financial performance lagged the U.S. economy. That said, I believe GE is a good short sale candidate, but you read and decide.

We'll use descriptive statistics by taking a sample of the population of nominal monthly returns of the Company. At this point, we won't make any statistical inferences. Some of the sample statistics will include the arithmetic time-series mean, and the time-series median. Also, we'll take a look at a histogram of nominal monthly returns. We'll also discuss the absolute frequencies, relative frequencies and cumulative relative frequencies of the return profile. Further, we'll determine the geometric mean return and the modal interval. The sample will consist of monthly returns between January 2000 and January 2013.

Readers should note that the selected sample contains two bull markets and two bear markets. Further, the sample contains both high interest rate and low interest rate environments.

The time-series nominal arithmetic mean monthly return was 0.1 percent. The time-series nominal median monthly return was -0.1 percent.

One of the nominal monthly returns was between -30 percent and -25 percent. Eight of the nominal monthly returns were between -15 percent and -10 percent. Seventeen of the nominal monthly returns were between -10 percent and -5 percent. Forty-five of the nominal monthly returns were between -5 percent and 0 percent. Forty-four of the nominal monthly returns were between 0 percent and 5 percent. Sixteen of the nominal monthly returns were between 5 percent and 10 percent. Twenty of the nominal monthly returns were 10 percent or greater.

About 29 percent of the nominal monthly returns were between -5 percent and 0 percent. Further, 28.4 percent of the nominal monthly returns were between 0 percent and 5 percent. A little over five percent of the nominal monthly returns were between -15 percent and -10 percent. Finally, 10 percent of the nominal monthly returns were between 5 percent and 10 percent.

That said, 48 percent of the nominal monthly returns were between -30 percent and 0 percent. That means the other 52 percent of the nominal monthly returns were 0 percent or higher. The modal interval was -5 percent to 0 percent.

The time-series geometric mean nominal monthly return or time-series nominal monthly compound growth rate was -0.2 percent. The nominal geometric mean monthly return on a bond equivalent basis was -2.4 percent. The nominal geometric mean monthly return on an effective annual yield basis was -2.42 percent.

We'll make a statistical inference about the population geometric mean nominal monthly return. The population geometric mean nominal monthly return at 95 percent confidence, assuming a standard normal distribution, was between -0.187 percent and -0.213 percent.

General Electric's nominal monthly return distribution was negatively skewed and playtykuric.

Next, we'll compare some of those sample statistics with the sample statistics of the S&P 500 between 2000 and 2012.

The arithmetic time-series mean monthly nominal return on the S&P 500 was 0.1 percent. The time-series median monthly nominal return on the S&P 500 was 1 percent.

The geometric time-series mean nominal monthly return or time-series nominal monthly compound growth rate on the S&P 500 was 0 percent. I'm sure you can calculate the nominal bond equivalent yield and nominal effective annual yield on the S&P 500: It was 0 percent.

Thus, General Electric didn't outperform the S&P 500 between 2000 and 2012.

The sample standard deviation of nominal monthly returns on General Electric was 8.2 percent. The sample standard deviation of monthly returns on the S&P 500 was 5 percent.

Between 2003 and 2011, revenue grew at a nominal compound growth rate of 4.4 percent. However, between 2008 and 2011, revenue declined at a nominal compound rate of 3.5 percent.

Net income declined at a nominal compound rate of 1.1 percent between 2003 and 2011. Between 2008 and 2011, net income decreased at a nominal compound rate of 10.7 percent.

The dividend declined at a nominal compound rate of 2.9 percent between 2003 and 2011.

Between 2003 and 2011 revenue increased. However, net income declined. Part of the lack of appreciation of net income can be attributed to GE's workforce declining at a 0.2 percent pace between 2003 and 2011. Management should have decreased labor expense at a faster pace.

Honeywell's (NYSE:HON) revenue and net income increased at a nominal compound growth rate of 6 percent between 2003 and 2011. The dividend increased at a 7.8 percent pace.

Siemens' (SI) revenue increased at a nominal compound growth rate of 3 percent between 2003 and 2011. Net income increased at a 7 percent pace and the dividend increased at a 12 percent pace.

GE performed the worst financially of the three diversified machinery firms.

General Electric was valued at 15.78 times trailing earnings and 1.53 times trailing sales.

Siemens was valued at 14.56 times trailing earnings and 0.94 times trailing sales.

Honeywell was valued at 22.59 times trailing earnings and 1.40 times trailing sales.

On a price-sales basis, GE was expensive.

Technical Analysis

Shares of General Electric are trading above the flattening 50-day simple moving average. The share price of the firm may be beginning an intermediate-term advance. That said, the Firm is a laggard during this intermediate-term advance and should be considered a good short sale candidate.