General Electric (GE) came out with earnings on the 19th and beat estimates for earnings and missed slightly with revenues. The company reduced earning estimates for 2013, based on further reduction in the GE Finance business, to further eliminate that exposure.
For this the market saw fit to slam GE's share price down by 3.4%. Finishing up the day at $22.03/share. The entire market was down and I think traders were looking for any reason to unload anything. Today, the stock is trading as of this writing, at $21.50/share. Another drop of about 2.4%. The stock has now dropped nearly 6% from it's high water mark, and has increased by over 32% for the year anyway.
It appears that the gloom and doom crowd is out, and for me that spells opportunity time. Buying shares at a discount right now could be good for your portfolio's health. Don't start to panic because of the short sellers and bears of GE have been screaming.
For every seller there is a buyer, and investors for the long term could benefit by our credo; Buy The Dips, Add To The Core. That being said, I have been taking some heat on GE of late.
Not only have the negative articles been coming out of the woodwork, but even my own article on GE is being questioned for the analysis and timing.
After writing this article extolling the virtues of General Electric the day prior to earnings, some readers thought I was so far off base that they actually questioned the "timing" of the article;
I'm not smart enough to know whether you should be slammed for writing this article the day before an earnings miss which would have resulted in already being down over 3% if one had read this article yesterday and bought GE then, but if I were one of those unfortunate people, I would be really upset with you. Why did you time your article like that ? It seems very irresponsible to me, but like I said, I'm not smart enough to understand this situation, so please explain it to me.
OK, I responded to this:
the article does not say anything other than the stock is a must own and rather than focus on any one price, the idea of long term investing is to accumulate. The company actually did a damn good job, but missed revs even though both earnings and revs increased significantly YOY. Not easy in this environment. Personally, I think today is a great day to add....I never time the market...do you?.
We invest for the long term, not for a trade. So a one or 2 day drop does not take away a 45% increase since we first suggested it.
Thanks for asking
I thought I was pretty direct with my reply, but now I read this comment;
I understand the points you just made and I certainly don't claim to be a market timer, but speaking of timing, you still didn't explain yours. Why write this article the day before the earnings release when such a move could possibly blow up in your face, which it did ? Why not write the article a couple weeks ago or a couple weeks from now ? Why write it the day before earnings ? Sorry, but that is not advocating market timing. I am advocating more responsible timing of your article and better anticipation of a negative event from a guy who should have known better.
My reply was a tad snarky to this (you can go to the article to read it if you care to), but it got me to thinking where on Earth are some people coming from? I have the same crystal ball as everyone else folks, and maybe I should borrow this guys?
Anyway, I went back to look at GE and why I really like the stock. Now I have this quarters earnings to look at also. What I have come away with is that the stock is now quite undervalued, especially when we compare it to other conglomerates.
Some Quick Facts To Support My Opinion
First of all, the quarter was pretty damn good in my opinion. Yes, they missed the revenue estimates by several hundred million bucks, but really folks, in the scheme of things, GE is a $240 BILLION dollar company.
If a company of this size can increase earnings YOY, as it did, and increase revenues YOY, as it did, a drop in the share price of 3.4% could give investors a big opportunity.
Take a look at this chart:
If you see what I do, the only metric that has dropped in the last 6 months is the price to book value!
At 1.81 times the share price it is cheap, relative to the companies largest conglomerate "brethren".
If one were to place a price to book value on GE of roughly 2.50, the share price would be around $30.00 and still would be considered cheap by this metric.
Now, conglomerates are very unique companies. They cannot be pigeon holed into any one business sector because there are so many different sand boxes they play in. General Electric is the biggest and the best of any of them no matter what anyone thinks of Jeff Immelt.
Not to mention that the equity in the brand name alone is probably worth another 20% in the share price perhaps.
I think the current price is now at least 15% lower than it should be. I think that this is a strong buying opportunity for investors looking for a solid dividend with the potential for capital appreciation. GE is my stock pick for 2013, and I am sticking with it.
Disclosure: I am long GE.