GE brings good things to life?

[Baker]

I almost never buy individual stocks but did pick up GE yesterday at 31.94. Stock has dropped thru the floor last few days and might well continue to fall into the high twenties which is where it was at its September lows but yesterdays price is good enough for me. My understanding is there was sufficient insider <i>buying</i> last fall (contrast this with enron insider selling).

anyway do your own research if this is of interest. This is a small position for me and mental stops at about 25 I suppose though would be very surprised if we get that low. This is a buy and hold for me.

 

[selkirk]

Baker good luck with the GE play, and congrats on the timing. I have some $32.50 puts out on the stock, I believe it can trade $35-$40 maybe $45 if people fall in love with the stock.

To me at this price it represents fair value with a yield of 2.10% and trading around 23 PE. Now saying that I do not think this stock will grow as quickly as many brokerage analsysts believe that it can (terrible sentence).

GE is involved in appliances, NBC-TV, GE capital (very large segment of the company and growing), aircraft engines, ect.

Many people believe that since GE can grow their share in each of these business and produce growth in the 15% range.

now when a company has sales of over $100 billion it is not easy to grow sales by 15%. Fortune magazine (september issue) stated if GE were to grow its revenue by 10%+ (15%) the company would have to grow to by
$17 billion in 2001 equal to market cap of 3M or Qwest,
2002 have to grow revenue equal to Fedex (federal Express)
2003 have to grow revenue equal to a little beverage company called Coca - Cola.

as for me I first wrote puts on GE in early Sept. and everything was going good until Sept. 11, sold them for $2 bought them back at $4. Since then I have written more options on the company leaving me with a profit after the loss on the first trade.

I currently have $32.50 puts out on GE (expire different months) so I hope it stays above $32.50, believe it could trade in the $35-$40 range.

also a few weeks ago when Bill Gross of Pacific Management (great bond trader) stated his concerns about owning GE short term debt, heard him attacked on CNBC (America Now -) J. Cramer pounded his fist on the table saying how GE was a great company and he owned it, in his fund and personally, he went on about how great of a stock GE is to own now and in the future. The other 3 all agreed and one even stated (jokingly ??) that Bill Gross was probably just trying to drive equities down and bonds up by attacking the mighty GE. That was when I thought GE is going down. it was over $35. hopefully Cramer and CNBC dont tell me how great GE is, would hate to see it drop below further.
always get scared when the (experts?) all agree on those shows.

GE will grow slowly so would not put a high multiple on the stock around 20-24X fair value, anything say 30PE is overvalued, for a slower growth but good quality company.

by the way GE will try to buy Tyco Financial--- would make sense, maybe that is why they were going to issue more debt.

thanks
selkirk

 

[Baker]

Hi Selkirk,
Thanks for the good info on GE. Funny thing was about an hour after I bought GE I got an email from a broker friend of mine saying that their analysts (Morgan Stanley) had just upgraded GE to a buy and I remember thinking what a mistake i'd just made. lol

So do i take it you've sold naked puts with a strike at 32.5? if so did you get assigned when GE dropped below 32 last week? sorry if these are stupid questions but i'm a little slow to get a hang of this. i'm currently in the process of setting up for options so maybe it'll be a little easier for me to figure out with some actual experience.

Agree about Cramer. Although I can't even watch him and
?Kudlow as they just give me a f'in headache. In fact about the only cnbc weasel i could ever stand was maria and that's just
because she was easy to look at and now even she gets on my nerves. someone once said that whenever maria starts the session with her "Looks like (fill in the sector) is strong right
out of the gate..." thats the time go short.

 

[BOHICA]

Baker,

I also bought GE in Sept. of last year, first at $36, and then more at $31. This is also a buy and hold for me.

I think that it will be a solid long-term play.

I also bought Tyco at $30, and hope that it can hit $45 soon(LOL), so I can try something else.

Good luck with your GE, I think that it is a good buy.

Mark
p.s. selkirk, thanks for your insight. I always read your threads, but have never responded.

 

[Baker]

just hope this economy doesnt double dip back to a recession and take GE and everything else back down. here's an interesting article mentioning GE but speaking specifically to the issues of acounting practices and proper PE evaluations that i found on a stock board this mornhing.

http://abcnews.go.com/sections/business/DailyNews/stockmarket_inflation020422.html

here's an excerpt--

A recent Centre on Economic and Business Research report says that given traditional P/E ratios, the Dow Jones Industrial Average should be in the 7,000-9,500 range if the reported profits have been accurate. But the study notes, "if our conclusion about over-statement of profits is correct, this range [becomes] 5,500 to 7,500. The likelihood must be that there are more Enrons, accounting black holes and document shredding to come."

 

[selkirk]

Baker currently have May $32.50P and June $32.50P out, may consider rolling some out and maybe down. (buying back the mays or June and selling Sept. or Dec. rolling out, or down to $30P) will think about that in a few weeks.

currently have RY (royal Bank ) options trade on Montreal I sold $52.50 July calls (covered) currently the stock is over $55 cdn. got $2.20 for the option. hopefully can roll that out and up to Oct. $55 or Jan $55, would prefer Oct $55, will have to wait on this on, so far the worse option I wrote this year.


Global Crossing which just went bankrupt had accounting just as bad as Enron, there will be other companies during a bull market agressive accounting is much more accepted until the bear comes. hopefully not to many companies committed fraud on the scale of Enron and Global Crossing.

Bohica welcome to the forum and good luck with your stocks, always good to share information, or different points of view on an investment.

thanks
selkirk