GE and Ford Lead October Sentiment for 'Comeback' Securities

October ended last Saturday October 31, 2009. As many people analyze the performance of securities for the month, I’d like to look at sentiment and change in sentiment for the top comeback securities. Comeback securities represent companies that recently got into financial trouble or met new competitive challenges that dramatically reduced their market cap. These companies are now trying to regain their market strength and valuations.

Sentiment is a measure of how people feel a stock will perform and is captured by a voting mechanism that indicates a strong buy, buy, neutral, sell, and strong sell. The value of sentiment is based on the ‘Wisdom of Crowds’ where the many will in most cases make better decisions than the individual. Higher sentiment stocks are considered higher quality stocks, while lower sentiment stocks are considered lower quality stocks.

Voting Mechanism for Capturing Sentiment

While overall sentiment is effective in defining the quality of a stock, change in sentiment provides a timing mechanism to understand underlying changes in a security potentially ahead of a price move. For example, a large increase in sentiment should be seen as positive even though the underlying stock has a low absolute sentiment.

For this analysis, we will use sentiment generated by the web application, Piqqem. Piqqem captures, processes, and displays sentiment results by allowing its users to vote on the price direction of a stock and then applies its own propriety factors to calculate sentiment for a security. In their model, 0 is the lowest and 4 is the highest sentiment.

Q3 Sentiment for Comeback Securities

The above chart shows Ford’s (F) current sentiment leading the group as of October 31, 2009 at 2.63 with Washington Post’s (WPO) sentiment at 1.20 and bringing up the rear. GE came in with respectable sentiment results above 2.5, while Motorola (MOT) came in with a sentiment rating of 2.2. AIG and Freddie Mac (FRE) are both in the 1.7 range, while the New York Times (NYT) and Washington Post continue to struggle in the old media sector with sentiment below a dismal 1.5. But how did sentiment change for this group?

Q3 Change in Sentiment – WPO, F, and MOT are the Winners

Source: piqqem

The change in Q3 sentiment for these seven securities show a strong upward bias for the Washington Post, Ford, and Motorola, a slight upward bias for AIG and Freddie Mac, a neutral bias for GE, and a downward bias for the New York Times. The change in sentiment for the Washington Post should be viewed with caution as the % change can be overstated given the low absolute sentiment number. Changes in sentiment can be an early warning system for the underlying security.

This group tracked almost exactly with the change in the S&P sentiment as they both were up about 3%.

Disclosure: No Positions

Comments

[ex GE'er:]

GE's going nowhere as long as I-melt is around. Any positive sentiment is based on the hope that the Board will finally act and end our 8 years of embarrassment and misery under the architect of such brilliant strategies as Ecomagination, Healthymagination, and StockPriceStagination.

Nov 06 08:33 AM

[rcramer1@ne...:]

Completely agree I-melt as well as the lack of any action by the board need to change and they need to to keep the investors more up to date and give us the respect we are paying for. Change is good and way over due for GE and the way they manage the business.

Nov 06 08:51 AM

[rgsmith@inb...:]

IT IS OBVIOUS THAT IMMELT DOES NOT HAVE THE INTELLIGENCE TO BE CEO, AND CHAIRMAN OF THE BOARD, OF A LARGE COMPANY SUCH AS "GE". IF THE BOARD HAD ANY INTEGRITY IT WOULD HAVE FIRED HIM YEARS AGO. THE ONLY THING THAT "GE" STOCK HAS DONE SINCE IMMELT HAS TAKEN OVER IS NOSE DIVED EXCEPT FOR THE RECENT REPRIEVE FROM ITS DISASTROUS PLUMMET TO ABOUT $5.00 WHEN SOME PEOPLE BEGAN TO REALIZE THAT A GREAT COMPANY LIKE "GE" WOULD RECOVER AS SOON AS A NEW CEO TOOK CHARGE.

SOME ONE WITH A LOT OF SHARES SHOULD LEAD A STOCKHOLDER REVOLT AGAINST IMMELT.

RGS

Nov 06 09:47 AM

[LPC:]

Jeff Immelt and his CFO Keith Sharon should have resigned or fired for their mismanagement of GE. They gambled big with GE Capital and lost, a strategy that almost broke the Company.

The fact that they're still there collecting their multimillion dollar salaries says a lot about them and the lack of integrity for GE's
for GE's Board of Directors.

Nov 06 10:40 AM

[casey00001:]

The biggest mistake Jack Welch made in his career was naming Immelt his sucessor.

Nov 06 12:31 PM

[connorport:]

Not only have they mismanaged but they have also lead the forefront of insider trading on the stock. I was a lucky one that held no GE until it hit $6. My father on the other hand just retired from GE and saw his stock holdings dump to nothing right after his retirement. Now the company has plans to move the plant to Mexico so they can build precision motors on dirt floors. When you are doing something right then leave it alone. When you are doing something wrong then change it then.

Nov 06 04:10 PM