GE Has Been Woeful, Go For a Sector ETF Instead

GE (GE) missed its numbers, toned down the guidance, had problems with its finance and healthcare businesses.

The way this is being portrayed is that they really did not see it coming until very recently.

This is a perfect example of how an ETF can be a better proxy for a sector than a stock. I have never owned the stock in my time as an investment manager.

The thought process all along has been quite simple. Earlier this decade, so early in the bull market, the stock had the headwind of it being the wrong time for mega caps. Then, as the time that mega caps should lead came upon us, my thoughts focused on whether or not a huge complex conglomerate was the best way to access the industrial sector and, again, my answer was no.

Part of it is that I don't like media, which ironically was a bright spot. More importantly, though, I have not been a fan of financials for ages.

We are hearing that infrastructure is strong, so maybe that is a reason to own the stock. Well maybe, and of course at some point, the stock will, at a minimum, ride the coattails of a bull market. (Maybe it'll even provide leadership?). However wouldn't it make more sense to own a purer infrastructure name?

There will be billions and billions spent over the next decade or two on infrastructure globally - and this is not debatable - so it is reasonable that stocks in this space will do very well over that time period. (Note that this does not really create urgency right here right now).

I can't rule out luck for having avoided GE, but it has been a woeful laggard, and despite so many people coming on CNBC who have talked it up, I think the best it can hope for over the next few years is riding the market's coattails.

Comments

[cranky old ...:]

GE has provided the average investor with a unique opportunity: to buy the stock, collect a dividend just shy of 4%, and wait for a recovery. It's div is secure; it's taken its lumps; it's still in the strongest growing businesses around; and it's not going to screw up again. The bulk of its miss, resulting from the inability to dispose of assets in a volatile market, are likely to be reversed as some stability returns; in the meanwhile it still enjoys about the lowest borrowing costs in corporate America, giving its finance arm a competitive advantage in loan pricing.
At $32 it's a lot safer with as much upside potential as any ETF on the screen

2008 Apr 14 06:15 AM

[Geoffrey Lordi:]

"...and it's not going to screw up again."

How could you *possibly* say this with conviction - where's your evidence?

"...it's a lot safer with as much upside potential as any ETF on the screen..."

I think I've done much better YTD with a number of ETFs on *my* screen...And I'm not talking about double shorts!

I'm sorry, but if you don't like Roger's statements, a purely subjective discussion enumerating the same points we hear throughout the day on Bloomberg & CNBC isn't going to get folks into the company.

2008 Apr 14 09:54 AM

[Urbane Gori...:]

I think that most people think of GE as an appliance manufacturer - Not too surprising as that's the most common exposure to the Brand. In fact, it really is more a 'broad based mutual fund' with fingers in all aspects of the market. (Health care, banking, construction, aerospace, appliances, wind-generation, etc..) This aspect of GE makes it harder to pigeon-hole and instead of a buyer being able to assign risk based on a sector approach, you're open to downsides in various aspects of the economy.

Having said that, if you truly are a 'long-term' investor,it would seem that now would is a pretty good time to buy. Eventually, financials will perk up, and based on the clear upside to the hardware side of GE (it has a 6 month backlog of orders... ) The company should rebound to it's old levels. That's a pretty good return, and as noted above, with a 4% dividend to boot.... That's presuming that GE doesn't have to cut it's dividend as most financials seem to these days...

Thx jegan ;-)

2008 Apr 14 10:39 AM

[Bandwagon S...:]

Just a minor correction: The two ETFs listed with this article, IGF and GII, are not infrastructure ETFs in the sense that GE is an infrastructure company. IGF is invested in about 40% utilities, 20% energy infrastructure (pipeline co's), and the remainder in toll roads, rails, and other hard asset management businesses. GII is almost entirely in utilities.

GE's infrastructure business involves providing technology and building for such assets, and is primarily getting growth from emerging markets that need to build infrastructure as a part of their development. IGF and GII's business models are based on fee arrangements, which are mostly driven by usage of the asset and inflation, whereas GE's infrastructure business is driven by economic development and population growth. Therefore, IGF and GII are not really reasonable substitutes for GE -- they aren't really representative of the same business or sector.

2008 Apr 14 12:31 PM

[Diegojames:]

eCoMAGINATION going in many directions . One(1) CEO NOT ENOUGH. Its A WIN WIN. IF IT DROPS BUY MORE. I AM JAZZED . THINK OF THE URANIUM !!!IT IS A POWER COMPANY READY TO HAPPEN.
IF they really had imagination WOW.!!!! IT just got blind-sided by REALITY. OK -SPIN OFF OR SELL. THINK FAST BEFORE CRAMERICA discovers what Jeff Imelt has done.
Why if they covered 7% of Arizona with solar panels they could power the USA. OH my GOD!!!
I am selling my utilities(in the immediate area) ,buying more FCX ,find me a transmission line manufacturer fast, maybe they can buy my NASDAQ: ASTI stock for hard to reach corners of AriZona and.....
Jeff sell the home appliances :the stove and dishwasher were junk(my wife says so!!!) the refrig is so-so. The medical division is to expensive- drop the price and make it all in Vietnam or China.
Lighten up on GE bulbs- spin off; call me and when my wife finishes with a minor problem in California Real Estate she can easily handle your PROBLEMS
DIEGOJAMES
PORTER RANCH, CALIFORNIA
LET BERNANKE GIVE YOU BONDS FOR YOUR FINANCIAL DIVISION

2008 Apr 14 10:27 PM

[slider:]

We need Rand Arasgog of former ITT to create some sharedholder value by spinning off assets.

2008 Apr 15 01:32 AM

[silver-bullet:]

GE is around $30, its P/E is in the mid teens. It has a great management team with products that will be in demand for a long time. The only hic up is in its finance operations.

Load up when it drops - every time.

2008 Apr 16 01:27 AM