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GE may be next activist target, Gasparino says

  • GE could be the next target of activist investors, which is one reason CEO Jeffrey Immelt invited Nelson Peltz to speak with his senior management team a few months ago, according to Fox's Charlie Gasparino.
  • GE confirms a meeting discussing broad market events took place last August, but insiders reportedly say Peltz discussed shareholder activism and specifically what a shareholder activist might want out of GE management, including where the company can cut staff and what pieces could be sold off to spark the stock price.
  • Gasparino says it’s unclear how worried GE management is over being a target of activists; GE recently announced plans to spin off its credit card unit, it raised its dividend last year and has been buying back shares, all moves intended to appease investors.
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Comments (16)
  • fuzzymc
    , contributor
    Comments (118) | Send Message
     
    Payed no attention to Gasparino when he was at cnbc and pay the same amount since he has been at fox! Traded GE 3 or 4 times in the last couple of years for small gains as a hold it has been dead money for quite some time!
    17 Mar, 07:01 PM Reply Like
  • Ted Bear
    , contributor
    Comments (598) | Send Message
     
    Trying to clean up the mess left by the 'management wizard' jack welch has left them panting for oxygen.

     

    I don't think Immelt has done a poor job, but he inherited a massively leveraged company that was geared for short term gains. He has done what he could, including the things cited above, and maybe inviting the fox into the hen house will have bought him some time with the shark community.

     

    Maybe.

     

    But after all is said and done, this company is geared to cyclical events, albeit they have tried to take the cyclicity out of it with disparate businesses. At the end of the day the global economy is in shambles, and GE is a victim of that, as well as years of (mis) management geared to maximizing the compensation of the few with little regard to creating long term shareholder value.

     

    It is hard to believe that GE's stock is trading at less than one half of it's peak valuation of some fifteen years ago. That's the true legacy that the 'wizard' left for the shareholders.
    17 Mar, 07:53 PM Reply Like
  • STF22
    , contributor
    Comments (65) | Send Message
     
    I'm with you mostly Ted, but to spin it slightly differently. Its more a matter of unrealistic expectations and a price pumped up to all hell that makes GE look so lackluster. You outlined the leveraged aspect and if you read Welch himself, he believed fully that managed earnings were almost the morally right thing to do and that smoothing earnings by postponing or advancing expenses wasn't fraudulent. The leverage and the clockwork increases led to an unrealistic multiple. Leaving out the P/E expansion and compression does paint a more fair picture about the underlying growth of the business.

     

    In the "glad it wasn't worse", Sandy Weil put Citibank shareholders out of their misery after a 30 year run of hyper aggressive build a multiple and use stock to buy out the bigger company routines. He did know a lot about his business to be fair and Jack Welch really did know something about managing a company. Their strengths at real management were undeniable yet, a great deal of the glory of their stocks value growth had to do with their second gifts as promoters.

     

    It seems to me plain as day that Immelts plan is to build a company that can pay out a dividend close to 50% of earnings and grow that at twice the rate of inflation.......
    ... that is really a heroic feat for such a large company...or almost any investment long haul.... even if the dividend only kept up with inflation and the stock were trading at 40, a 2% real interest deal is a pretty hard to find thing in a low interest world but would also be great in a high inflation world as long as the cap ex for needed expansion had a very high rate of return. The nature of most of these business is that they only have a small number of opportunities where they can employ additional capital in businesses they know... going into businesses they don't know will likely cause losses but the growth of what they do know has more to do with the growth of the economy or sector.. not how much capital they have available. It is their knowledge and customers and distribution systems and trained employees that create margins in the busineesses they know.

     

    Immelt is doing a find job....anyone that expects a 200 billion manufacturing company to grow at 10 or 12% a year is spending too much time reading theoretical buisness books and doesn't understand the common sense of the business word that isn't about roi but opportunity, isn't always about skill when there is a headwind overwhelming skill or a tail wind making average skill look good.

     

    But, if someone has a company they are confident will grow at 12% to 15% a year and isn't trading at a mutiple already pricing that in , so that the only way to go is down with any disspointment when reality eventually hits after they've exploited their niche.. if a person has that sort of investment.. take it ...don't complain about immelt not being able to do what your mytical company can...especially while running a 200 billiion dollar behemoth
    18 Mar, 12:49 AM Reply Like
  • jakoba
    , contributor
    Comments (345) | Send Message
     
    200B manufacturing company?

     

    More like 150B;

     

    Revenue by year:

     

    2013, $146B
    2012, $147B
    2011, $147B
    2010, $150B

     

    If it was only a manufacturing company, then it shouldn´t in my opinion be trading at 1.75x revenue, rather maybe 0.5-1.0x revenue.

     

    The way I see it we put too much emphasis on the P/E ratio. This will also fluctuate based on for example QE programs (as is now seen in Japan), with the «tapering», margins may shrink or at least stabilize, and then companies that aren´t growing revenue will suffer the most.

     

    In the book «what works on wall street» the performance of some 7700 companies between 1950 and 1994 was analyzed. For large cap stocks the price/sales ratio was more important than the price/earnings ratio, but less important than the price/book ratio. (Low price/sales companies dramatically outperformed high price/sales companies over time.)
    18 Mar, 09:31 AM Reply Like
  • STF22
    , contributor
    Comments (65) | Send Message
     
    I'd 100% agree with the price sales ratio being one of the best rough gauges of range-of-potential-worth and 200% agree sales are the best way to describe "size". .. profits come and go and can be muddled with too easily. If a company doesn't make a margin sales, no amount of smoke and mirrors will keep it's units in business . Employees need to be paid, plants need to be maintained.... "deferred maintenance" can only go on so long before the crap hits the fan. If a company maintains it's sales.. its got to be at least breaking even (now, breaking even isn't a very good thing for an investor...but it does at least mean there is something there that could be improved enough to yield profits).

     

    As for the 150.. vs 200 yes.. but I pretty much meant that. I wasn't trying to make an argument of exact value. I was talking in order of magnitude..didn't bother looking yesterday and while I've read the financials briefly I'm not one that can keep numbers in my mind separate if i look at the financials of 50 companies in a month. I remember things like ratios more ... and really just tend to remember my key take aways and would need to go back and look again(which I do) when someone makes an intriguing point.
    18 Mar, 10:29 PM Reply Like
  • User 51750
    , contributor
    Comment (1) | Send Message
     
    Interesting... Very interesting.
    17 Mar, 10:10 PM Reply Like
  • U2A Ventures
    , contributor
    Comments (174) | Send Message
     
    I am not sure how I feel about this piece of information yet... i didnt consider GE to be an activist target, but now that the seed is planted in my head, it certainly has some plausibility. Will have to sleep on this one.
    17 Mar, 10:38 PM Reply Like
  • romilar
    , contributor
    Comments (662) | Send Message
     
    Apologies to those better informed. I don't know who the activists are or what they want or how they mean to get it. I know I like GE boring, plodding and consistently paying, with a foot print that spans the globe.

     

    There is a hard fast rule in the hospitality industry (particularly the bar business) "never let the inmates run the institution". Take a lesson GE - you stay in charge of the pour.....Rom
    17 Mar, 11:45 PM Reply Like
  • Shan Song
    , contributor
    Comments (20) | Send Message
     
    GE seems too big for activists to shake up.
    But I would rather wish it come true to bring some freshness into the company's top management.
    18 Mar, 02:31 AM Reply Like
  • rayfrechette
    , contributor
    Comments (22) | Send Message
     
    I can't see anything wrong with Jack Welch's management style; both, stock price and dividend were quite attractive under his tenure. Why do we own these companies if not to see their values go up? GE was in the upper 50's/share under Mr. Welch and the dividend was as much then as now with the stock price increasing. I have never felt that Mr. Immelt did much for GE and sold it years ago. I now own it again, and feel it is growing in spite of Immelt.
    18 Mar, 06:47 AM Reply Like
  • jakoba
    , contributor
    Comments (345) | Send Message
     
    I don´t think this company deserves to trade at more than $255B market cap at this point. At 16x earnings with revenue in 2013 that was the same as in 2010, I think that´s enough. It is also trading at 1.75x revenue, whereas for example Siemens is trading at 1.0x revenue.
    Let´s face it, GE is an aged company that isn´t headed so much towards the future as such a company should do and has done in the past. Taking a look at what Elon Musk (Tesla, Solar City, SpaceX) is doing could give GE a clue of where they could go. Probably Immelt is just not the right guy for this job anymore. Too old, out of sync with the future. He´s like a Steve Ballmer of Microsoft.
    18 Mar, 07:16 AM Reply Like
  • Seekingbetaguy
    , contributor
    Comments (162) | Send Message
     
    Under the "always better to leave the party a little too early rather than a little too late" maxim, management wizard Jack Welch is now hawking on-line MBAs from the Jack Welch Institute at Strayer University. (Strayer is seeded #8 in the West, I think?) That Welch name makes any resume sparkle. GE used to own CNBC and I always enjoyed the late Mark Haines and others grousing about their 401(k)s which were larded to the gills with $60/sh. GE stock. May buy GE just in case they spin off off or sell the medical device arm.
    18 Mar, 09:08 AM Reply Like
  • 50 cent it is
    , contributor
    Comments (1462) | Send Message
     
    I'm glad to see sen Markey being charged with ethics violations for his part in bringing down herbalife
    There will be consequences
    18 Mar, 09:13 AM Reply Like
  • Seekingbetaguy
    , contributor
    Comments (162) | Send Message
     
    I'd own just in case they spin-off or sell the medical device business.
    18 Mar, 11:18 AM Reply Like
  • stockpicker99
    , contributor
    Comments (77) | Send Message
     
    GE is a standard value company . I think after IPO. this stock will go up at least 50% within 12 months. Do your own home work prove me wrong please!
    18 Mar, 04:31 PM Reply Like
  • minwyhe
    , contributor
    Comments (103) | Send Message
     
    How can we test it? You will run into hiding if it doesn't and will appear if it does. I would like to take you up on your inane evaluation and be you some real cash on that scenario, because when has GE ever gone from 25 to 37-38 in that short of time? I have been a stock holder since 1995 and I never recalled it and I do not see it happening in that time frame.
    19 Mar, 06:47 PM Reply Like
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