The Light's On, but Where's GE?
GE isn't fitting into fund portfolios as it has historically.
General Electric's (GE) stock has staged a sharp recovery from historic lows set in March. Some fund managers saw a rare buying opportunity, but not everyone has jumped on the bandwagon. Based on a sampling of recent interviews with portfolio managers, those on the sidelines include well-known names like Bill Miller at Legg Mason Value (LMVTX) and Robert Goldfarb at Sequoia (SEQUX). GE no longer exhibits the reliable dividend-paying steady-Eddie profile it has long boasted, so it now has to compete differently for a spot in their portfolios.
Crack Goes the Core Holding
GE has built a legacy for reliable profit growth and operational efficiency and has successfully managed its diverse mix of businesses over time, including its massive financial-services arm, GE Capital. But that legend unraveled when GE posted disappointing earnings in the first quarter of 2008 because of the emerging global credit crisis, which only gathered steam and touched off an avalanche in its stock price. By early March 2009, GE's stock price had declined by more than 75% since that earnings miss in 2008.
The company had pinned its 2008 first quarter earnings miss on GE Capital. This past February, GE ended up cutting its dividend to bolster its balance sheet as the financial-services unit continued to be a thorn in its side. GE stated in March that its total write-offs for its $39.5 billion in real estate loans could add up to $900 million in this global recession.
Harry Milling does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
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