Monday, January 11, 2010

Schaeffer's "Three Stocks to Watch: General Electric" and "A Year of Living Sideways" (GE)

Long time readers know that I don't think much of current GE management. The stock is down over 50% since Jeff Immelt took over in 2001. Considering the assets he had to work with the result is pathetic.
That said the action last week was constructive. Here's a threefer-
From Schaeffer's Investment Research:

Options players flocked to the shares of General Electric Co. (GE: View sentiment for GEsentiment, chart, options) on Friday, as the stock continued its recent rally and broke through short-term resistance at the 16.50 level. In fact, the security has tacked on more than 9% since the start of the year as it rests above support at both its 10-week and 20-week moving averages.


On Friday, more than 284,000 option contracts changed hands on GE, which is double the equity's average daily trading volume of 133,850 contracts, according to data from In addition, traders favored calls; 72% of the volume crossed the tape on the call side....MORE

Here's Reuters on last week's upgrade:

JP Morgan analyst Stephen Tusa called GE "our top pick in this (industrial) group" in a note to clients.

"We believe that normalized earnings at (GE Capital) could be significantly better than current expectations," Tusa wrote.

The shares of the largest U.S. conglomerate were up 93 cents at $16.38, their highest since early December.

Over the past year of trading, GE shares have lost some 8 percent of their value, trailing the 17 percent rise of the Dow Jones industrial average...

And on the year ahead:

GE shareholders may face a year of living sideways

After a tumultuous year that saw General Electric Co (GE.N) stock tumble to 18-year lows, then whipsaw back to triple that level, shareholders of the largest U.S. conglomerate may be in for a year of few, if any, gains.

GE Chief Executive Jeff Immelt last month told investors he expects profit at the company's big industrial units -- which make jet engines and electric turbines -- to be "in a word, flat," which aptly describes GE's overall 2010 prospects.

Sluggish demand for heavy equipment and the hangover of the credit crunch on its hefty finance arm could set the stage for little movement in GE shares, investors said.

"They're going to continue to struggle. From an earnings standpoint, they can certainly get some wind behind them on the industrial side. Things will be tougher on the financial side," said Peter Klein, senior portfolio manager at Fifth Third Asset Management in Cleveland, Ohio. Referring to the stock, he added, "It'll go sideways for a while."

The Fairfield, Connecticut-based blue-chip company's portfolio will be in flux this year, as its deal to sell a majority stake in its NBC Universal media business to No. 1 U.S. cable operator Comcast Corp (CMCSA.O) faces regulatory scrutiny and the company continues to pare back its GE Capital finance unit.

Wall Street analysts, on average, have a 12-month price target of $18 on GE shares, according to Thomson Reuters I/B/E/S. That represents a 16 percent rise from the stock's current level at around $15.50.


While GE's equipment arms have strong growth prospects in emerging markets, including China, India and the Middle East, their performance will be offset by continued concerns about other business units, investors said. That marks a contrast to more focused industrials, including United Technologies Corp (UTX.N) and Caterpillar Inc (CAT.N), which have outperformed GE and the broader market over the past year....MORE