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What! No Santa?

02/20/2018

There has never been a time in my life that the massive conglomerate of General Electric was not one of the most respected companies in America.  Sadly, since the stock hit $53 per share in 2000, it has repeatedly lurched downward and is only $15 per share today.  The total market capitalization from dropped from nearly $600 billion to barely $130 billion now.  Sad!

Many analysts believe the decline was predetermined by the rapid expansion of an excellent industrial company into many unrelated industries.  After all, what does a company in both aviation and healthcare know about show-business or financing giant parcels of commercial real estate?  The obvious answer is “not enough.”

Some believe it is time to break apart the company.  Probably, the aviation and health care divisions would be more valuable as separate companies than mired under GE’s myriad problems.  However, that will be difficult.  As an example, GE used its cash to pay dividends and work out of problems but neglected to make the required contributions to its generous pension plan — to the tune of $31 billion.

After losing half of its value over the past year, some bulls think the relatively cheap PE ratio of 15 and dividend yield of 3.2% make it attractive.  Maybe . . . but the ultimate indignity would be for this stock to be thrown out of the Dow.  What!  No GE?

Warren Buffett warns you should never fall in love with a stock – any stock.

But you can still be nostalgic!

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