Bullish/bearish on GE? Make your case here - new lows today

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CurlyDave
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Re: Bullish/bearish on GE? Make your case here - new lows today

Post by CurlyDave » Sat Aug 18, 2018 1:57 am

GE is a company with a lot of legacy baggage.

Personally, I would take my fun money and put it equally into 10 very small, very young companies with great stories.

A lot more fun to watch, no pension problems, and one of them just might be a hit.

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Earl Lemongrab
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Re: Bullish/bearish on GE? Make your case here - new lows today

Post by Earl Lemongrab » Sat Aug 18, 2018 11:57 am

A core principle of my investing strategy is that I have no talent for picking stocks. I'm not sure anyone really does but I don't. I assume that whatever the current price is represents the consensus value. If in general people thought that the price is likely to be lower in the near future, they'd sell what they had now and that price would be achieved shortly.

If you really believe that GE is going underperform, you can make a lot of money with various option strategies.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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arcticpineapplecorp.
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Re: Bullish/bearish on GE? Make your case here - new lows today

Post by arcticpineapplecorp. » Sat Aug 18, 2018 1:37 pm

AtlasShrugged? wrote:
Fri Aug 17, 2018 6:45 am
Wow....a lot of bears on GE. Time for a contrarian, or bullish view. I posted on this question some time ago.

My wife recently purchased a block of shares, and then a second block earlier this year in her Roth. I asked her about it. She said (I paraphrase): This is GE. They have been a component of the Dow for practically forever. This company has gone through two world wars, a great depression, a bunch of recessions, some mediocre chairmen, and a great recession. In every case, this company found the person and/or the wherewithal to persevere, and to thrive. I am making my bet on the long-term prospects of GE. Are people going to stop needing power? Stop flying? Stop getting sick? Nope. Considering their adaptability and track record in the past century, GE is a pretty safe bet - LONG TERM (meaning multiple decades).

Her money, her choice (as an aside, I am all low cost index funds, save some inherited stock). But I found her rationale interesting. If you look over a century, and consider how they have overcome all of the challenges of the last 100 years, then GE is a screaming buy for the patient investor.

Bogleheads, in 2048, I will update you, assuming I am still alive. :happy
I think this is a cognitive error your wife is making. I will tell you why and show you a couple of ways this thinking can go horribly wrong. I hope you share this post with your wife, if for no other reason than to have her think in ways she may not have ever considered.

You are assuming the length of time a company has existed is somehow predictive of whether it will continue to exist.

The thing you have to understand is that just because GE (or any company) did adapt/pivot/survive past economic/political, etc. downturns/recessions doesn't mean it will do so indefinitely. You have to understand that the challenges GE faces today are nothing like the challenges they faced 100 years ago. So to assume they will survive new challenges just because they survived older challenges is an error in thinking.

Now let's look at some actual examples and see what you think (yes, your and your wife's feedback is most welcome):

What would you say if we went back in time to 2000 and asked, "How would you like to invest in a company that's celebrating its 150th anniversary as a company?" (in fairness, it was not a publicly traded company this entire time, but most aren't. In fact GE has been around for 126 years but not publicly available to purchase until 1962). You'd say (or your wife'd say): "Yowza! A company that's been around for 150 years! That's a company that knows how to thrive/survive/adapt to all sorts of changes in the economic/business/political/demographic landscape! Sign me up."

Well, that company was called Lehman Bros. And just 8 years later (in its 158th year as a company) it was completely out of business and you (or your wife) would have lost 100% of her investment. How's that sound? Not so good, right? Of course, one can always rationalize and say "Yeah, but that won't happen to me". Not sure why you'd think that, when that happened to plenty of perfectly good people who also happened to think the exact same thing. You might minimize it and say it's a one-off, right? Not that likely? Maybe, but that doesn't mean old companies by their nature of being old companies make for better investments (than the market as a whole). https://www.library.hbs.edu/hc/lehman/history.html

Want another example? Here's a good one:

By the logic of wanting to invest in old companies, shouldn't you then want to invest in the oldest companies? If a 126 year old company like GE (1892: https://www.google.com/search?q=when+di ... fox-b-1-ab) is great, isn't an older company greater? Well, you've already seen an older company (158 years, Lehman Bros) so that bursts that logic. Still, if it's old companies your wife's into, let's look at some of the oldest companies and compare how they have done compared to just investing in the market. (full disclosure, I'm using the S&P500 only because it goes back pretty far (8/31/1976). You might say, "But the oldest companies I'm intersted in go back farther than that!" Yes, but not as publicly traded companies, so you couldn't have owned them anyway. Morningstar shows the furthest back these oldest companies go is 6/1/1972, which is only slightly before Vanguard's S&P500 index fund, so we can compare these other oldest companies from inception against "the market", but have to do so using MITTX in order to look at prior to 1978). Even GE only went back to 1/2/1962 as a publicly traded company (according to morninstar).

We'll use the following companies (in this order on the morningstart charts). Some of the companies below have merged but I'm using the info received here (http://fortune.com/2015/06/10/oldest-co ... rtune-500/) :
Bank of NY Mellon 234 years old
Cigna 226 years old
JP Morgan Chase 88 years old
Dupont 216 years old
Colgate Palmolive 212 years old
Hartford FInancial Services Group 208 years old
Citigroup 206 years old
Consolidated Edison 195 years old
CSX 191 years old
Macy's 188 years old
State Street 186 years old
McKesson 185 years old
Cameron International 70 years old
GE 126 years old

I have to break them into two graphs because morningstar apparently only allows you to compare 8 things at time. Here's how these did against the S&P500 (back to 8/31/1976 and through present):

The first graph shows the S&P500 Index fund first, then compared to the list of stocks above from Bank of NY Mellon through Citigroup:

Image

source: https://quotes.morningstar.com/chart/fu ... A%5B%5D%7D

The second graph shows the S&P500 Index fund first, then compared to the list of stocks above from Consolidated Edison through GE:

Image

source: https://quotes.morningstar.com/chart/fu ... A%5B%5D%7D

In the final examples, I will use MITTX because it's also a comparable market like fund that goes back to 7/15/1924. We'll start the first chart at 6/1/1972 since all companies except GE started at or later than that date:

Image

source: https://quotes.morningstar.com/chart/fu ... A%5B%5D%7D

The final graph will also use MITTX but start when GE did (at 1/2/1962):

Image

source: https://quotes.morningstar.com/chart/fu ... A%5B%5D%7D

How'd they all do? Only 4 out of 14 companies (from their inception) actually managed to beat "the market" as measured by either S&P500 or MITTX. That's a 28% chance of having beat the market. Not good odds in my estimation. Did you see how badly some of these old companies did compared to the market? We know that Lehman Bros went out of business in its 158th year.

Maybe have your wife read the following articles and the two of you can discuss it. It's based on research by Henrik Bessembinder who found that only 4% of all the companies back to 1926 actually created all the value of the stock market. What's worse is that 58% of the rest of the companies actually did worse than if you'd owned a riskless treasury. I'd strongly suggest your wife stop searching for needles and instead own the haystack.

https://www.nytimes.com/2017/05/12/your ... -wont.html
https://www.nytimes.com/2017/09/22/busi ... tment.html
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

danaht
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Re: Bullish/bearish on GE? Make your case here - new lows today

Post by danaht » Sat Aug 18, 2018 1:54 pm

I am neutral on GE. Seems like it has gone down enough to were it might be an OK purchase. Having said that - the past management has made some really bad business decisions. This included selling parts of their businesses (ie financial) when the these businesses were valued at extreme lows - and they bought businesses (ie energy) when this was at an all time high. I don't have much confidence in the new management team either - since they are going back to the old playbook of the old management team (ie selling part of GE). In addition - GE has a costly pension plan to support that will be a real drag on earnings going forward. Given it's an individual stock - I'd rather buy a cheap international index (VEA, or VWO) than GE for any type of long term value investment at this point.

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Nicolas
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Re: Bullish/bearish on GE? Make your case here - new lows today

Post by Nicolas » Sat Aug 18, 2018 5:58 pm

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Last edited by Nicolas on Wed Sep 05, 2018 8:03 pm, edited 2 times in total.

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BolderBoy
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Re: Bullish/bearish on GE? Make your case here - new lows today

Post by BolderBoy » Sat Aug 18, 2018 6:11 pm

tmcc wrote:
Wed Aug 15, 2018 12:15 pm
Please offer your bull/bear case on the forward ROE
I own VTSAX, the Vanguard Total Stock Market Index Fund. It owns some GE stock. Therefore, I own some GE stock. If it makes money, I make money on it. But my risk of owning GE stock is diversified since VTSAX owns shares of all publicly traded companies, like GE.

You should own VTSAX too, instead of individual shares of GE stock.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

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arcticpineapplecorp.
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Re: Bullish/bearish on GE? Make your case here - new lows today

Post by arcticpineapplecorp. » Sat Aug 18, 2018 8:13 pm

Nicolas wrote:
Sat Aug 18, 2018 5:58 pm
arcticpineapplecorp. wrote:
Sat Aug 18, 2018 1:37 pm

In fact GE has been around for 126 years but not publicly available to purchase until 1962.

Even GE only went back to 1/2/1962 as a publicly traded company (according to morninstar).
This is not true. Can you provide the reference from Morningstar?

If I chart GE's price there and select "All" it does indeed start at 1/2/1962. But I think this is just because that's all the data they have or have chosen to present.

I have a subscription to the New York Times and can read every newspaper online in their archives from the beginning. I checked the closing NYSE prices for Tuesday, January 2, 1900, that date chosen at random, and found the following data for General Electric Company:

Bid: 123 3/4
Asked: 124
Sales: 600
First: 122 1/2
Last: 123 1/2
Low: 122 1/2
High: 123 1/2
Net Change -1/2

This data was grouped in a list among all other publicly traded NYSE companies at the time, in alphabetical order, just as they are today.
Here:
https://quotes.morningstar.com/chart/fu ... A%5B%5D%7D

Morningstar only has data for GE starting 1/2/1962. That's what I used. You're welcome to redo my charts with GE from 1900, but I can't see how to do that.

I still think you're missing the larger point:

From 1976 onward with GE you'd have 1/4th the value of what you’d have with the S&P500
From 1962 onwards with GE you'd have 1/3rd the value of what you’d have with MITTX

Even if GE existed back in 1900, the average investor wouldn't have held it for 118 years. But they "might" have held it for 40-50 years. The returns of GE over the last 40-50 years vs the market have not been kind to GE investors. That's the point. And nobody knows what the next 40-50 years for GE (or any company for that matter) will do. That's why you hold the market. Because you don't know what any one company in particular will do, so why not own them all and get the average return of the entire market. You're guaranteed not to underperform the market if you do.
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

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Nicolas
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Re: Bullish/bearish on GE? Make your case here - new lows today

Post by Nicolas » Sat Aug 18, 2018 9:53 pm

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arcticpineapplecorp.
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Re: Bullish/bearish on GE? Make your case here - new lows today

Post by arcticpineapplecorp. » Sun Aug 19, 2018 7:51 am

Nicolas wrote:
Sat Aug 18, 2018 9:53 pm
arcticpineapplecorp. wrote:
Sat Aug 18, 2018 8:13 pm
Nicolas wrote:
Sat Aug 18, 2018 5:58 pm
arcticpineapplecorp. wrote:
Sat Aug 18, 2018 1:37 pm

In fact GE has been around for 126 years but not publicly available to purchase until 1962.

Even GE only went back to 1/2/1962 as a publicly traded company (according to morninstar).
This is not true. Can you provide the reference from Morningstar?

If I chart GE's price there and select "All" it does indeed start at 1/2/1962. But I think this is just because that's all the data they have or have chosen to present.

I have a subscription to the New York Times and can read every newspaper online in their archives from the beginning. I checked the closing NYSE prices for Tuesday, January 2, 1900, that date chosen at random, and found the following data for General Electric Company:

Bid: 123 3/4
Asked: 124
Sales: 600
First: 122 1/2
Last: 123 1/2
Low: 122 1/2
High: 123 1/2
Net Change -1/2

This data was grouped in a list among all other publicly traded NYSE companies at the time, in alphabetical order, just as they are today.
Here:
https://quotes.morningstar.com/chart/fu ... A%5B%5D%7D

Morningstar only has data for GE starting 1/2/1962. That's what I used. You're welcome to redo my charts with GE from 1900, but I can't see how to do that.

I still think you're missing the larger point:

From 1976 onward with GE you'd have 1/4th the value of what you’d have with the S&P500
From 1962 onwards with GE you'd have 1/3rd the value of what you’d have with MITTX

Even if GE existed back in 1900, the average investor wouldn't have held it for 118 years. But they "might" have held it for 40-50 years. The returns of GE over the last 40-50 years vs the market have not been kind to GE investors. That's the point. And nobody knows what the next 40-50 years for GE (or any company for that matter) will do. That's why you hold the market. Because you don't know what any one company in particular will do, so why not own them all and get the average return of the entire market. You're guaranteed not to underperform the market if you do.
I get your point, I'm just saying it's absurd to say that GE was not publicly traded before 1/2/1962 because that's when Morningstar's chart begins. Morningstar can do what they like with their charts but it just isn't true.

I was a GE employee for 38 years and am familiar with the company.
I was going to edit my post, but then re-read it and saw I wrote it was a publicly traded company since 1962 "according to morningstar". So I'm not sure what else to change. I admitted originally my data was according to morningstar. That's all I had to go on and I was as upfront about it as I could be. Again, you're free to update my charts with additional data you can find/provide.
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

mxs
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Re: Bullish/bearish on GE? Make your case here - new lows today

Post by mxs » Tue Aug 21, 2018 9:01 am

jharkin wrote:
Thu Aug 16, 2018 6:54 am
JoeRetire wrote:
Wed Aug 15, 2018 6:24 pm

And they've been trying to dump their light bulb business for years, with no takers so far.
Good point... Does anybody even buy GE light bulbs anymore? I've always been partial to Phillips ;)
I recently made the whole house switch to LED bulbs and bought cheap Walmart brand bulbs for just under $2 for a four pack (the utility company helped lower the price in store). They only show light on the half of the bulb away from the socket and don't look great in fixtures where you can see the bulb. Fortunately, most of our fixtures conceal the bulb so these bulbs were great for a great price. GE makes LED bulbs that look closer to classic incandescents that look great when the bulb is exposed. They are more expensive, but that is what we bought for the 12 or so exposed bulbs we have.

Valuethinker
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Re: Bullish/bearish on GE? Make your case here - new lows today

Post by Valuethinker » Tue Aug 21, 2018 11:32 am

mxs wrote:
Tue Aug 21, 2018 9:01 am
jharkin wrote:
Thu Aug 16, 2018 6:54 am
JoeRetire wrote:
Wed Aug 15, 2018 6:24 pm

And they've been trying to dump their light bulb business for years, with no takers so far.
Good point... Does anybody even buy GE light bulbs anymore? I've always been partial to Phillips ;)
I recently made the whole house switch to LED bulbs and bought cheap Walmart brand bulbs for just under $2 for a four pack (the utility company helped lower the price in store). They only show light on the half of the bulb away from the socket and don't look great in fixtures where you can see the bulb. Fortunately, most of our fixtures conceal the bulb so these bulbs were great for a great price. GE makes LED bulbs that look closer to classic incandescents that look great when the bulb is exposed. They are more expensive, but that is what we bought for the 12 or so exposed bulbs we have.
http://luxreview.com/article/2018/02/ge ... -in-europe

European operation of GE lighting sold.

US operation for sale.

LED bulbs have upended the lighting industry. New players (Cree) have emerged. And demand for lightbulbs is fundamentally reduced. LED bulbs last at least 6x incandescent bulbs.

FWIW I use Phillips bulbs (in Europe). They cost more but they are also higher quality than the store brands.

tmcc
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Re: Bullish/bearish on GE? Make your case here - new lows today

Post by tmcc » Tue Oct 09, 2018 9:41 am

This thread is a monument to market timing :mrgreen:

edgeagg
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Re: Bullish/bearish on GE? Make your case here - new lows today

Post by edgeagg » Tue Oct 09, 2018 12:53 pm

GoldStar wrote:
Fri Aug 17, 2018 7:19 am
People will continue to need power, etc - what she doesn't realize is that people are less and less relying on GE to provide all these things as other companies eat their lunch. Many companies adapt until they are no longer able to - that's what's happening to GE.
Precisely. Power generation is becoming more and more decentralized - CA is mandating solar roofs and storage is becoming cheaper and cheaper. Load defection from utilities is already a thing. So those big gas turbines may become less and less relevant.

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Taylor Larimore
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Re: Bullish/bearish on GE? Make your case here - new lows today

Post by Taylor Larimore » Tue Oct 09, 2018 5:26 pm

Bogleheads:

This topic is a long way from Jack Bogle's wisdom:
By far the best way to own equities is to own them through either a Standard & Poor’s 500 index fund or a total U.S. stock market index fund.
Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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munemaker
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Re: Bullish/bearish on GE? Make your case here - new lows today

Post by munemaker » Fri Dec 07, 2018 10:04 pm

tmcc wrote:
Wed Aug 15, 2018 12:15 pm
GE is doing decade lows today. I bought $2000 worth at 12.xx today .
If you liked it at $12.XX, you LOVE it at $7.01. Back up the truck!

Seriously, SPECULATING on GE is a loser's game. You will do much better INVESTING in a diversified equity mutual fund.
Last edited by munemaker on Fri Dec 07, 2018 10:21 pm, edited 1 time in total.

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arcticpineapplecorp.
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Re: Bullish/bearish on GE? Make your case here - new lows today

Post by arcticpineapplecorp. » Fri Dec 07, 2018 10:12 pm

dividend is 1 penny per share. Yep, you read that correctly.

https://www.google.com/search?q=ge+divi ... fox-b-1-ab

But who buys stock for dividends anyway, am I right?
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

Valuethinker
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Re: Bullish/bearish on GE? Make your case here - new lows today

Post by Valuethinker » Sat Dec 08, 2018 11:11 am

arcticpineapplecorp. wrote:
Fri Dec 07, 2018 10:12 pm
dividend is 1 penny per share. Yep, you read that correctly.

https://www.google.com/search?q=ge+divi ... fox-b-1-ab

But who buys stock for dividends anyway, am I right?
Warren Buffett would agree.

I believe there are still classes of investors who require a dividend before they can legally invest in a stock? Th US GE retains a dividend of de minimis.

The Board of GE is behaving prudently. Until they can address pension fund and other debt issues they have no business distributing precious cash to equity holders.

GE has 2 or 3 excellent core businesses. The rest need to be disposed of or spun off.

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arcticpineapplecorp.
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Re: Bullish/bearish on GE? Make your case here - new lows today

Post by arcticpineapplecorp. » Sat Dec 08, 2018 12:00 pm

Valuethinker wrote:
Sat Dec 08, 2018 11:11 am
arcticpineapplecorp. wrote:
Fri Dec 07, 2018 10:12 pm
dividend is 1 penny per share. Yep, you read that correctly.

https://www.google.com/search?q=ge+divi ... fox-b-1-ab

But who buys stock for dividends anyway, am I right?
Warren Buffett would agree.

I believe there are still classes of investors who require a dividend before they can legally invest in a stock? Th US GE retains a dividend of de minimis.

The Board of GE is behaving prudently. Until they can address pension fund and other debt issues they have no business distributing precious cash to equity holders.

GE has 2 or 3 excellent core businesses. The rest need to be disposed of or spun off.
I meant that tongue in cheek because of all the posters who want to buy high yielding dividend stocks, so there are quite a few people who do in fact search for dividend paying stocks. My post was sort of a warning for those people that just because a stock pays a high dividend, it might eventually not.

Warren would agree for individual investors but the businesses his business (bershire hathaway) invest in do often pay dividends and he finds ways to reinvest them (sometimes in other companies rather than reinvestment in the company that paid the dividend). So whether they are valuable in part depends on whether you're an indivdual investor or a holding company that thinks they can do better investing the dividends elsewhere.

It will be interesting to see what GE does. Will it turn it around and how long will it take? Nobody knows.
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

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