Tuesday, September 1, 2009

Whither GE?

General Electric is the second-biggest Bin stock in terms of market cap, and probably the one best known. Like so many stocks that rocketed up in the past few months, it's been hammered recently. Today, it closed down 4.03% to reach $13.34.

On the one hand, "GE exec sees another 12-18 tough months ahead." That statement comes as part of its new "framework" approach to guidance, which has replaced specific targets. On the other hand, Sanford & Bernstein analyst Steven Winoker sees the reduction of uncertainty - which GE itself called a flattening of the downtreand - as good for the stock; his target price is currently $16.

I can't presume to forecast what GE stock will do in the near future, but I believe there's a near-term downtrend in place. I'll stipulate that there were downtrends in place for many industrial stocks in June that were sharply reversed. This time, though, there isn't any plausible catalyst in place to do so (except for company-specific items.) I don't see any in GE's near future that might do so; today's overall market drop in the face of good economic news suggest that the previous catalyst - discounting recovery - is spent.

My own hunch says that GE is going to keep dropping. It peaked at about the time when near-troubled banks like CVB Financial and United Bankshares have. Even though there's more to GE than its financial arm, there's no replacement for the recovery catalyst which would help the overall company reverse the stock's current downtrend.

Welcome to September, after which follows October.

Disclosure: I'm holding CVB Financial in the actively-managed Marketocracy mock fund I run.

1 comment: