Tuesday, November 25, 2014

"General Electric: ‘A Generation of Portfolio Managers Has Been Rewarded For for Staying Underweight’" (GE)

The stock is lower today than it was the day Jeff Immelt took over as CEO 13+ years ago.
We've had some thoughts on the management of Tom Edison's baby, links below.
From Barron's Stocks to Watch:
RBC’s Deane Dray and team note that a “generation of PMs, it would seem, has been rewarded for staying underweight” General Electric (GE). That, however, may be about to change. They explain:
GE stock has been a chronic underperformer in the Multi-Industry sector by most measures. Over the past 10 years, GE has underperformed the S&P 500 by 100 ppts. A generation of PMs, it would seem, has been rewarded for staying underweight GE. Without trying to rank-order these negatives, the list of investor grumblings about GE has included: (1) earning mix has been slanted too much (+50%) from GE Capital; (2) quality-of-earnings issues, often with a low GE Capital tax rate or a gain helping to make the quarter; (3) nagging long-tailed liabilities associated with discontinued businesses, creating ongoing “one-time charges.” This has been the case with Japanese retail finance and WMC, GE’s brief but expensive delve into subprime mortgages. (4) GE rarely has a clean quarter. There always seems to be some surprise shortfall detracting from all the other positives…

Theme now at GE is “change”. In our view, there are more changes happening at GE today than during any previous period in the company’s history. We note that CEO Jeff Immelt has now divested, including pending transactions, more than half of the revenues inherited from the Jack Welch era....MORE
Monday, September 10, 2001 was the day that Mr. Immelt took over at GE. The stock closed that day at a split adjusted $32.86. Today it is changing hands at $26.88.

I haven't owned the stock since '99. I was fortunate to not own this stock for the last decade-point-five. In the late '90's a very wealthy and very smart investor said to me:
"GE's phony-baloney earnings smoothing is going to have to end, it's approaching the level of a joke, in addition to violating the '33 act".
Sometimes you get lucky.

Some of our prior posts:

GE's Immelt reduced to whining after homicidal rant from Jack Welch (GE)
Mean Street: The Lost Cause of General Electric and Jeff Immelt (GE)
General Electric; Jeff Immelt: FAIL (GE)
Immelt’s Plans May Comfort Investors as Profit Falls (GE)
General Electric Beats Low Expectations; Speculators Confused (GE)
General Electric has been an investor disaster under Jeff Immelt (GE)
"Can General Electric Still Manage?" (GE)
Jeffrey Immelt to Replace Paul Volcker: Yeah, Right. (GE)
Compared to Volcker Immelt is a dwarf among pygmies.

[I think he is making a reference to Volcker's 6'7'' height while expressing disdain 

for Immelt and the President's other advisers. It can get confusing -ed] 
How General Electric Became a Basket Case (GE)
"Grading Jeff Immelt" (GE)
...Welch used to say that GE's CEO has only two jobs: allocating capital -- deciding where and how much to invest -- and evaluating people. Ask a wide range of expert GE observers -- current and former managers, other top-tier CEOs, Wall Street analysts -- to identify Immelt's wrong turns, and they focus on exactly those two categories...
And many more.