Tuesday, June 19, 2007

General Electric day



I'm officially declaring today General Electric (GE) Day. I guess when your market cap is over $400 Billion and your the 2nd largest publicly traded company in the world, a lot can happen in one day. GE's stock shot up today by 3.2%, the largest one day gain in more than 3 years (3 year chart pictured). Trading volume on the day was much more than double the normal volume, making the rise more meaningful. So much could be read into what occurred to GE today, and why it occurred, but I'll limit my thoughts to this short post.

The What and Why?

  • Investors speculated that profit growth could shine because of several new jet orders announced at the Paris Air Show (GE manufactures jet engines, among other things).
  • The yield on a 10 year note slipped 6 basis points (easing concern about borrowing costs)
  • GE bought a stake in a natural gas play (Regency Energy (RGNC))

Possible interpretations from the day:

The global economy is strong, and will remain strong in the near future. Those in charge of decisions regarding new jets, probably need to be fairly confident in this.

Natural gas plays may be a good value right now. Going forward they may excel. GE does not just take large stakes in businesses indiscriminately.

No big deal, stocks rise and fall every day.

-------------------------------------------

All and all a pretty eventful day for the company that owns MSNBC....gives them something to report I guess....

7 comments:

Middle Class Millionaire said...

It's reassuring to see that GE is also somewhat bullish on the long term prospects on natural gas as I recently initiated small positions in a couple of natural gas plays GZ and GO.A.

I just had a question about your portfolio. I'm a huge fan of all the companies you hold (with the possible exception of SMG) but do you plan on adding addition companies to your portfolio or is it a deliberate decision to keep the number of your holdings relatively small?

moneygardener (AKA investor99) said...

I do want to keep my number of holdings fairly small, as I believe that I buy companies at good prices, and I do not want to dilute that effect by owning the whole market.

It may grow larger than today's (12) but I'd like to keep it under 15, (with the exception of Trusts and smaller speculations that I may get into later.) I'm at the point now that I like these businesses so much, that I mainly think of adding to them instead of picking up a new holding.

Thicken My Wallet said...

GE is also known as a great defensive stock play so it may be a good hedge in case the market begins to bottom out. Its in a good position- it has interests in a lot of growth industries but also has a very defensive play about it.

Middle Class Millionaire said...

Although it is known as a defensive stock it is also viewed by some as a proxy for the US economy (in my opinion it should be a proxy for the global economy) but regardless it's possible that the stock could take a temporary hit if the US economy cool dramatically or dips into recession.

moneygardener (AKA investor99) said...

I agree with most of the comments here. GE is a defensive play, as their earnings growth should not be too volatile, in any environment, due to their breadth and market positions. Also, their dividend record has been superb.

I look at them more as a global proxy. It is akin to investing in a managed mutual fund without the fees. They pick which businesses they want to focus on going forward. I also really like that they are a leader in eco, or environmental technologies around the word. I think this side of their business will continue to grow at high rates, especially in BRIC countries (Brazil, China, Russia, and India).

Also their global sales will allow them to benefit from a weak $USD. I quickly tried to look up what percentage of their revenues are from the U.S. but I could not locate it in their 2006 Annual Report.

FourPillars said...

I like these businesses so much

MG - I'm no stock picker but isn't there some rule about not falling in love with the stocks you own? Ownership bias or something?

I'm not to try to change your strategy but it's something to keep in mind.

Mike

moneygardener (AKA investor99) said...

4P,

Love is a strong word. I'm always willing to sell something that deviates too from the reasons I bought it, and I have in the past. I don't think there is anything wrong with liking the companies that you own. I like them more when they're cheap...

Thanks for the comments.