This column is my opinion and expresses my views. Those views can change at a moments notice when the market changes. I am not right all the time and I do not expect to be. I disclose all my positions clearly listed on the page, and I do not trade my account on the stocks spoken of in this column unless fully disclosed. If that does not work for you stop reading and close the page. Do not bother me or harass me.
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Michael Kramer and the clients of Mott Capital closed out the position In GE as of November 13.
GE – It Was Bad
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GE what a disaster on so many fronts. The dividend cut wasn’t the worse part; it was that 2018 guidance that sank the stock. The dividend cut as we discussed, was widely expected, but the guidance for 2018, was even worse than what the bears and even I had feared. With full-year guidance cut to $1.00 to $1.07, making the stock at $20, just too expensive, with nearly no earnings growth, making it a position I could no longer hold on to.
Even with today’s decline, GE’s stock is likely still overvalued, trading at a one-year forward p/e ratio of nearly 17. In-line with Honeywell and United Technologies, GE does not deserve to trade anywhere near the valuation of either of the two former companies, in my opinion.
The direction of earnings is the only thing an investor needs to see, to know that valuation is too high, and has likely, even more, room to fall.
Could GE trade at only 15 times earnings, very likely. Could it trade at 10 times 2018 earnings, possibly? It depends on how well the company performs in the coming quarters, and how deep the issues are. It is not worth finding out from my standpoint either.
Even from a technical standpoint, there is no saving the stock. The stock could fall to a level under $15 before findings its next level of technical support. $19.75 was a critical level and it fell through it with far greater ease than anticipated.
The stock is broken, the chart is broken.
Then the questions started floating through my head, what if it was removed from DJIA? Crazy to think, but certainly not impossible.
Too much to bare, in a market that offers too many opportunities.
My opinion, my thoughts.
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Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future.
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