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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.
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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.
GE PE Ratio (Forward 1y) data by YCharts
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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.
GE Annual EPS Estimates data by YCharts
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.
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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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Charts used with the permission of Bloomberg Finance L.P. This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.
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