Tag Archives: General Electric

General Electric News

General Electric, once one of the world’s biggest conglomerates, may be on the verge of breaking up.

GE was the worst performer in the Dow Jones Industrial Average (DJIA) in 2017. From Yahoo Finance:

2017 was a painful year for investors in General Electric (NYSE: GE) as they watched shares of the industrial stalwart crumble. The last quarter of the year was particularly difficult when GE stock lost nearly 28% in value, ending 2017 down a whopping 44.8%. Dismal numbers, top management churn, a dividend cut, a major portfolio restructuring in the works …

GE investors who depended on the dividend saw their income cut by 50%.

Despite the dividend cut, thanks to an equally sharp drop in the price of the stock, GE remains one of the top 10 yielding stocks in the DJIA.

And now there is talk about breaking GE up into separate companies. From CNBC:

“GE has started down the road to breaking itself up,” tweets CNBC’s David Faber, noting the CEO’s comments this morning on the investor call. “People close to the company tell me that outcome is likely with an announcement possible as soon as this Spring.”

From Seeking Alpha:

Nelson Peltz’s Trian Fund Management, which has seen its investment in GE decline 30% since when he bought into the company in 2015, is pushing the conglomerate to explore possible sales or spinoff of many of its businesses, including those in health and power, sources told the New York Post.
Trian founding partner and GE director Ed Garden has been spending much time recently with GE Chief Executive John Flannery, and it’s Trian that is behind GE’s decision to explore such sales.

What does this mean for GE shareholders? Management and the Board of Directors are working hard to enhance shareholder value. It remains to be seen if they are successful.

Tagged , ,

Ending a bad habit

Did you ever hear about the famous feud between the Hatfield and the McCoys?  They lived in the mountains on the West Virginia/ Kentucky border in the late 1800s.  It all began in a dispute over a hog and led to the death of two dozen people over a 20 year period.  As time passed the original reasons were lost and the feud became a deadly habit.

Most people are creatures of habit.  Some habits are a good thing.  It’s a substitute for rethinking a lot of things we do automatically: we shower, brush our teeth and eat breakfast mostly out of habit rather than spending time wondering if we should.  It makes our lives easier.

The habit of saving money for retirement is also a good thing.  It’s a habit that leads to financial success.  But what we do with that money can lead to bad habits.  Getting into the habit of investing in the same thing year after year can lead to bad results.

For example, Microsoft (MSFT) has made some people – like its founder Bill Gates – one of the richest men in the world.  Adjusted for stock splits, it was $0.10 /share in 1986; today it’s about $54/ share, a gain of over 54000%.  However, if you had bought it in 1999 hoping to see that trend continue you could have paid $59/per share.  You would still be waiting to break even, having lost money over a 17 year period.

Unfortunately, this is the kind of habit that so many investors exhibit.   They may buy stock in a company they work for and develop the habit of sticking with it even if the company has problems.  General Electric (GE) has tens of thousands of employees who bought its stock.  They saw the price drop from $60/share to $6/share between 2000 and 2009.

They may read about a mutual fund in a magazine or on-line and buy it without doing the appropriate research and add to it out of habit.  Habits are a substitute for thinking about our actions.  Some habits, like exercise and punctuality are good.  But we should avoid falling into the trap of making investment choices out of habit.  To do so can lead us to the same fate of the investor who bought Microsoft 17 years ago or GE 16 years ago and is still waiting to get even.

One way to avoid the trap of using habits to make investment choices is to regularly re-examine your investments.  Ask yourself if you had cash, would you buy the same things you currently have in your portfolio?  If you don’t know the answer, this is the time to get professional guidance from an investment professional, a trusted fiduciary who has your best interests at heart.

Tagged , , , , , , , , , , ,

GE Retirees health insurance

GE is one of the companies that are working hard to reduce the amount it must spend on retiree health care. As people live longer, the cost of lifetime health care coverage for retired employees becomes a larger part of a company’s bottom line. GE recently offloaded the supplemental insurance coverage for salaried retirees to another company that specializes in employee benefits.

With that in mind, here is what a member of the GE employee family had to say about this. Even if you are not a GE retiree, the analysis is very worthwhile.  (edited)

When you turn 65, Medicare becomes your primary health insurance even (I think) if you are still working for GE, and definitely if you are retired from GE. … [But] one needs to sign up for Medicare within 3 months before or after their 65th birthday month, or face a lifetime late enrollment penalty.

You can either purchase a Medigap plan on the open market using Medicare.gov to search the available plans, or you can use OneExchange the same way. Or, if you’re feeling lucky/healthy, one can just use the 80% coverage of Medicare Part B and go without a Medigap plan – after all, Medicare Part B pays 80% of Dr. visits…The Medigap plans basically cover the 20% of OV’s that Medicare doesn’t – plus a few other things, but that’s their primary role. A person could do a simple break-even analysis and figure out how many OV’s they would have to have in a year to equate to the premiums they will pay for a Medigap plan. A healthy person would actually be better off financially (in the short term anyway) without a Medigap plan, as most people are paying at least $100 per month per person for that coverage, I believe. Of course, it is insurance, so what you really hope for is that you pay the premiums and don’t need it, right?

Since you also would be losing your GE drug coverage, you very much would want to enroll in Medicare Part D, drug coverage, or you will be paying the retail price for drugs, without the coverage of the Part D plan, and also without the negotiated drug prices the insurance carriers receive – a bad proposition all around. If one’s prescription drug needs are modest, there are very low-cost plans available like Humana/Walmart, which provide good protection at very low cost. If one’s prescription drug needs are a little more exotic, then it would pay to explore which plan would be best, using the plan selector engine at Medicare.gov or OneExchange. My experience using both plan selector engines was they came up with a very closely matching answer. In my case, even with one Tier 3 drug that costs $250 per month retail, Humana/Walmart was the least costly plan, but several others were very close.

Or, if this person was OK with using a managed care plan, there is also the option of going with a Medicare Advantage Plan, or a managed care plan, aka Medicare Part C. Those are the plans for which we get the flyers every Annual Enrollment period. I think generally these are very cost effective, often covering Medicare Parts A, B and D with a premium of zero dollars, but you have to be prepared for the restrictions on where you can go and who you can use, you generally need a visit with a Primary Care Physician (PCP) in the HMO before seeing a specialist, etc. My view on these plans is that you give up some choice and control in exchange for saving quite a bit of money on premiums. But watch out for the geographical and network restrictions.

Tagged , , , , , , , , , , ,

What’s the Wall Street View of GE?

The Street is falling out of love with GE.  About 40% of analysts give GE a Market Perform – a “Gentleman’s C” – with an equal number above and below that ranking.  Since there’s little reason to buy a stock rated average by the street (buy an index fund instead and get the same resutl with less risk) GE is treading water.

Paraphrasing JP Morgan at Barron’s

Try as it might, General Electric (GE) just can’t get anything going. Don’t expect that to change in 2015, say the folks at JPMorgan.

We began our investment career working with GE employees and retirees.  We once worked for GE.  We remember how well the stock did under the leadership of Jack Welch.

We also have a well-founded skepticism of Wall Street analysis.  That said, we are not better than anyone else in predicting the future.  We don’t know when (or if) GE will regain its footing and begin to grow at a rate that will make it more attractive.  In the meantime, the main thing GE has going for it is a dividend yield over 3.5%.

Tagged , , , , , , , , ,

General Electric (GE) dividend increase disappoints

General Electric announced a 4 cent increase in its annual dividend, from $0.88 ($0.22/per quarter) to $0.92 ($0.23/quarter). The x-dividend date is December 18th and the pay date is January 26, 2015.

A number of analysts were looking for a bigger increase. The smaller-than-expected rise in the dividend is attributed to the drop in oil prices. GE has made a big bet in energy infrastructure including wind, as well as in more energy efficient transportation such as fuel efficient jet engines and locomotives. Lower oil prices make investments in these items less compelling.

It looks as if it will be some time before GE gets back to the $1.24 annual dividend it paid prior to 2009.

Tagged , , , , ,
%d bloggers like this: