Market Overview: The 'Generals' Appear to Be Retreating 19 comments
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At the end of the year I wrote quite negatively about General Electric (GE), though I suggested that perhaps a different "general", General Motors (GM) would be the worst performing DJIA stock this year. While I was correct so far on the outlook, I certainly missed on the extremes, as Citi (C) and Bank of America (BAC) have been worse than GE and GM is actually in 7th place. By the way, I am no longer negative short-term on GE as of 3/5 - I posted a comment to that article.
I wanted to test a hypothesis that investors "generally" hate the market, which is perhaps why GE and GM have both been pounded. I checked my universe of other "generals", and here is what I found (click on chart to enlarge):
Clearly investors don't like generals generally speaking, as 8 of the 10 generals have underperformed the market by more than 10% year-to-date. The best one is down "just" 18%. The group is down 39% median and 42% on averag, significantly worse than the market. This couldn't be random, could it?
To test, I identified several other nominal groups. First, I checked in on the Americans, and I wasn't sure what I would find. Good news: The "Americans" (51 of them) are beating the market, down a median of 22.6% and an average of -20%. Not too shabby. Perhaps the subliminal messages of "Buy American" are at play.
I then checked the "Universals": slight outperformance again, with a median of -24% and a mean of -23% for these 13 names. Next I checked "International", and this was quite interesting given the outperformance of "Americans". This group of 10 is down 33% median and 31% on average. So, not as bad as the generals, but way worse than the Americans.
Might there be a bit of patriotism or nationalism at play? To check, I investigated the "Nationals": 22 of them, with slight outperformance (median of -23% and mean of -24%), confirming the patriotism factor. Finally, I checked for "Safe" stocks, and they are down a median of 25% and an average of 28% (4 names). I suppose no one is believing any stock is safe these days!
Based on my sampling, the general's performance is off-the-charts and anything but random. My guess is that this could be an irrational response to the constant negative headlines for the two most popular generals, GM and GE. Clearly, investors aren't interested in stocks in general, but especially general stocks.
I hope that you found this somewhat humorous. As one of my business associates said today, participating in the market these days is similar to enduring surgery without anesthesia. Feel free to email me if you would like me to test any other groups of stocks sharing the same first name!
Disclosure: No position in any stocks mentioned
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This article has 19 comments:
(Allusion is to the Roadrunner cartoons.)
This article may be a joke, Alan, but it is arguably as scientific as some of the analysis here....
The Intercontinentals? (if any)
The Globals?
The Westerns? (& Northerns & Southerns & Easterns--which of the four is doing best, and which worst?)
Also, what about various tech prefixes--there must be half a dozen common ones.
On Mar 07 02:51 PM Nick Waddell wrote:
> How about the Royals? Royal Dutch Shell, Royal Bank of Canada, RBS,
> Royal Caribbean Cruises. Would these somehow represent the lagging
> British Empire?
> This article may be a joke, Alan, but it is arguably as scientific
> as some of the analysis here....
On Mar 07 03:12 PM Roger Knights wrote:
> The Continentals?
> The Intercontinentals? (if any)
> The Globals?
> The Westerns? (& Northerns & Southerns & Easterns--which
> of the four is doing best, and which worst?)
>
> Also, what about various tech prefixes--there must be half a dozen
> common ones.
A while ago I got tired of MBI and reversed my position for some IBM. It worked.
I have written rather extensively on this subject over the past few months, and investors are rapidly recognizing that many companies, especially ones stuffed with debt (which is usually the case when there is a lot of goodwill), don't offer much downside protection in terms of asset valuations at a time when earnings aren't plunging and not likely to recover anytime soon.
On Mar 08 12:48 AM constructe wrote:
> No, I think genreally people are pissed off bad companies still linger
> and we all watch America's wealth go down the drain paying for the
> bad mistakes financial institutions made with CDS and CDO bets. American's
> instinctively know somethings broken in the stock market and it's
> not mark to market. That value has served very well in the stock
> market since its inception thank you.
On Mar 08 12:48 PM Alan Brochstein wrote:
> I refer you back to my GE article from 12/27, as I disagree. Yes,
> it's easy to try to pin all of the problems on GE Capital, but that
> just isn't the case. There are many issues, including too much debt
> even outside of GE Cap, pension asset erosion, declining demand globally
> for industrial products and not to mention that many of the projects
> that GE might have financed with GE Cap will struggle to find financing
> at all. GE fooled everyone for years, buying on a binge and financing
> with debt, financing their customers' purchases and financing share
> repurchases. The emperor, I am afraid, has no clothes. With that
> said, I commented on that same article on Thursday as GE was making
> a new low that 6.50 has even bears on the name like me calling of
> the dogs...
Anyway, the obvious ones you overlooked are the Bulls and Bears (ignoring Bear-Stearns as it _may_ skew the results a teeny bit).
HardToLove
gimly,you say you are a new investor. i am a 30 year investor,from age 37 to 67..i think i could give you a few tips...one of the worst mistakes,'among others',was to buy or sell the whole lot of what i wanted to buy or sell,instead of averaging up or down,like 100 or 200 shares at a time,rather than 1000 or more shares all at once....my arguments at the time was that i paid more commission by doing it that way....believe me,the little bit of extra com. was nothing compared to the large amount of $$$$ LOST, buy buying or selling the whole lot all at once...i have alot of other tips..as any other seasoned investors would have..but if you can follow just this one i gave you..it will save you a lot of $$ and a lot of misery..after following this rule for the longest time i foolishly did it again recently by purchasing 1000 shares of GE at 17.00$ a share..you can well imagine my frustation since then..i could also tell you to use a stop loss on most of your purchases especially in times like this..WRITING THIS IS MY FORM OF PENANCE FOR BEEING SO STUPID AFTER ALL THESE YEARS! but i still believe that GE will someday go back up to at least 17.or even more..so i am SLOWLY buying other shares at very low prices..good money after bad???? i don't think so..as paul kangas would say "wishing you all the best of good buys"!!!!!!
On Mar 08 12:33 PM gimli wrote:
> Thank you for a "humorous analysis of some general companies". I
> own some GE and have ridden this "general's horses a#@" down from
> $15.86 to $6.. Then they finally decide to cut the dividend! So even
> though I am a new investor trying to learn how to invest safely..I
> "generally speaking" haven't been successful with the "Generals"
> yet. But unlike GM, GE just has to fix one division and wait it out
> as the rest of the company is doing fine. So I think that if you
> wanted to place a bet on which "General" will survive and thrive
> the nuclear meltdown of the economy, GE looks very good between $5-$7
> a share.
stockcharts.com/h-sc/u...