I've dropped General Electric (GE) from my list of core stock holdings, which now only consists of Google (GOOG) and Amazon.com (AMZN). When I posted my core stock holdings on September 10, 2007, I believed all three stocks had: 1) A business model with significant growth potential; 2) A product that is future focused; and 3) A passionate leader with staying power.
The financial crisis of 2008 showed that I was mistaken about #1 for GE. The crisis revealed that the company was overly dependent on earnings from GE Capital, and that most of their earnings growth in the 80s-90s was likely due to the financial businesses, and not the core industrial businesses. In fact, it now seems to me that the industrial businesses were languishing even prior to the recession. The declines were just being masked by the gains of GE Capital during the financial bubble.
Without great returns from GE Capital, it appears to me that the company won't be able to effectively implement the infrastructure and environment initiatives that need to create business success. Therefore, I have sold the majority of the GE shares owned at a significant loss and will be looking to sell the remaining balance in the next few months.
Disclosure: At time of publication, we own shares of Google and General Electric in our trading accounts and Google and Amazon.com in our managed accounts.
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5 comments:
Do you have other income streams besides stocks? It seem like a rough time to invest in the market.
better luck next time, sir.
I almost did the same thing. I'll bet you are kicking your self now.
It's not GE that relies on their financial arm for value, it's the stock market. The company has excellent diversification and management. You bought at a bad time and sold at a bad time it seems. Good luck!
@ Moneymonk,
Other streams of income, from highest to lowest value include dividends, fixed income (CDs, bonds and money market funds), self empolyment income, and seasonal part time income. At this time, these sources are not enough to cover our expenses.
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