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GE: You Can Smell The Blood

Alessandro Pasetti profile picture
Alessandro Pasetti


  • Keep an eye on the correlation between GE, other industrials, and the Japanese Yen.
  • We are at a point in the business cycle where a stock with a beta as high as GE's cannot be ignored.
  • That is true particularly considering GE is the most attractive restructuring story of a certain size in the marketplace.
  • Of all industrials, though, Cummins remains the most attractive equity story, based on its risk/reward profile.

With the Japanese Yen strengthening against the US Dollar, you have to wonder where your money is safely parked nowadays. Could the answer be General Electric (NYSE:GE)?

And, are there any useful lessons to be learned by gauging the value of the Boston-based behemoth against the USD/JPY exchange rate?

(GE vs USD/JPY, 4 Feb - 9 March. Source Yahoo Finance)


Solid, high-yielding consumer staples — Coca-Cola (KO), PepsiCo (PEP), Procter & Gamble (PG), Johnson & Johnson (JNJ), and so forth — remain riskier, in terms of capital appreciation, than they ought to be at mid/late cycle after a nine-year rally, while more cyclical equity investments, such as industrial stocks, look so overvalued based on my DCF calculations that only a very long-term view might attract value hunters now to such terrific companies such as Boeing (BA), Caterpillar (CAT), Cummins (CMI), Honeywell (HON) and United Technologies (UTX).

(GE vs JPY vs 10-yr US Trs vs BA vs CAT vs CMI vs HON vs UTX. Source: Yahoo Finance)

Very possibly, GE is the most attractive restructuring story of a certain size in the industrial world, and that is reflected in its depressed share price. The stock currently trades at $14.5, which is close to multi-year lows, having changed hands at much higher levels for most of the past two years.

(Source: General Electric)

However, GE has been more resilient than many pundits thought it would be in the past two weeks since its 10-K hit the wires on 23 February.

(GE vs S&P 500 vs 10-yr US Trs vs BA vs CMI.)

What does that mean?

Balancing Act

The 10-K announcement essentially was a non-event for those who have followed its developments over the years, but nonetheless its resilience on the stock exchange has been remarkable in a market where willing risk-takers

This article was written by

Alessandro Pasetti profile picture
I am the co-founder and chief strategist of UK-based, SEO & research firm Hedging Beta Ltd. Based in London, I previously worked for almost five years at Dow Jones/The Wall Street Journal (Feb. 2009 - Sept. 2013), producing research, commentary and analysis for the investment banking community. Prior to that, I contributed to the launch of Loan Radar (Dec. 2005 - Jan. 2009), where I worked for three years in London. I had stints in equity research at Bear Stearns in London (Jan. - Apr. 2005) and HVB in Munich (May - July 2005). I did his intermarket analysis research thesis with Unicredit Bank in Milan (Dec. 2003 - Sept. 2004). Married on 19 September 2014, I have a child, Matteo, who was born on 10 August 2011.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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