GE

In The News: Market Volatility, iPhone Unit Concerns, Wildfire Liabilities Piling Up

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Let’s take a look at some top stories from around the markets including headlines in the biotech and tobacco spaces, some household names facing material selling pressure, and the significant impact of massive wildfires in California. By Kris Rosemann Market volatility persists as of the November 12 trading session. Concerns surrounding global trade disputes and a stronger dollar are weighing on investor expectations, and multiple big name companies facing selling pressure only add to less than rosy outlooks. The biotech space (XBI) remains under pressure with future price uncertainty providing a material overhang, and big tobacco is under pressure as a result of the potential for a ban on menthol cigarettes from the FDA. Simulated newsletter portfolio holding Altria (MO) … Read more

GE Slashes Dividend Again; Will Reorganize ‘Power’ Business

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Image Source: rik-shaw Industrial giant General Electric plans to cut its dividend once more in order to accelerate deleveraging, and it also will split its ‘Power’ business into two units. We’ve cut our fair value estimate for shares following the strategic update and earnings report. By Kris Rosemann Prior to its earnings release and strategic update before the open October 30, General Electric’s (GE) Dividend Cushion ratio was 0.1, which brought with it very poor Dividend Safety and Dividend Growth ratings, even after it halved the payout in late 2017, as its industrial operations were not able to generate enough cash flow to sustain a healthy payout. Management now plans to reduce its quarterly payout to $0.01 per share from … Read more

In the News: Gold, Auto Sales, General Electric

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We don’t think gold makes much sense outside perhaps a very diversified portfolio. Auto sales weren’t all that great in September, and some are calling for a bottom in General Electric. By Brian Nelson, CFA The price of gold (GLD) will continue to be volatile as many own it as both a global inflation hedge and an asset implying safety from global economic crisis. We think gold may make sense sometimes, but perhaps only as a very low weighting in a very diversified portfolio, if at all. The case that gold has any intrinsic value is rather weak, too, “Gold Is But a Shiny Yellow Metal,” particularly because its industrial and consumer uses are rather limited. Gold holds value largely … Read more

Dividend Growth: Capital Preservation Remains Key

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Image Shown: Since mid-June 2015, the performance of an ETF tracking the midstream MLP industry (AMLP) has collapsed while the performance of an ETF tracking the S&P 500 (SPY) industry has surged. By The Valuentum Team We think one of the things we do better than most is in our work supporting capital preservation. We have a knack for parsing out risk and explaining that risk clearly in advance to our members. A lot of investors tend to be buy-and-hold as they reinvest dividends and capture compounding over time, and this is wonderful. But it is okay to change your mind, too. It is okay to factor in new information and to be somewhat active in your equity portfolio construction, … Read more

Honeywell Remains a Top Industrial Idea

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Image Source: Honeywell It has been a long time since we explained to readers what we look at in stocks, and it’s probably a good time for a quick refresher. At Valuentum, we think a comprehensive analysis of a firm’s discounted cash flow valuation, relative valuation versus industry peers, as well as an assessment of technical and momentum indicators is the best way to identify the most attractive stocks at the best time to consider buying. We think stocks that are cheap (undervalued) and just starting to go up (momentum) are some of the best ones to evaluate for addition to the simulated newsletter portfolios. These stocks have both strong valuation and pricing support. Said differently, both the market likes … Read more

General Electric: The Quintessential Falling Knife

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Image Source: Valuentum The story of General Electric (GE) is a great one to illustrate how we think about equities. After being a long-time bull on the company, we had removed General Electric from the simulated newsletter portfolios while it was trading a few dollars shy of $30, but that is not the point of this piece. What we want to illustrate is how hazardous catching falling knives can be (see the three stages above). Many an investor believes that stocks are less expensive just because they have fallen in price. This is simply not the case. The relative expensive or cheap nature of a stock is based on a comparison between its price and value. A stock’s price can fall, … Read more

Valuentum’s Weighted Average Cost of Capital (WACC) Distribution

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The weighted average cost of capital is one of the most subjective measures in corporate finance, but it is also one of the most important ones. “The most important item over time in valuation is obviously interest rates…If interest rates are destined to be at low levels…It makes any stream of earnings from investments worth more money. The bogey is always what government bonds yield….Any investment is worth all the cash you’re going to get out between now and judgment day discounted back. The discounting back is affected by whether you choose interests rates like those of Japan or interest rates like those we had in 1982…When we had 15 percent short-term rates in 1982, it was silly to pay … Read more

General Electric Stripping Businesses, Dividend in Aggregate

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Image source: GE investor presentation By Kris Rosemann Though it had long ago become apparent that General Electric (GE) was struggling to generate ample cash flow from its industrial operations, “GE Takes the Plunge, Halves Dividend,” speculation had been running rampant on how new CEO John Flannery would handle the mess of a business he had been handed. Investors may have thought they got the answer in late 2017 when the company announced billions in dollars of divestitures and a dividend reduction, but here we are again, discussing what will become of GE’s once sprawling portfolio of industrial assets. With its dividend reduction in November 2017, GE announced its intention to refine its portfolio to focus on its three core … Read more

In the News: Facebook, General Electric, GameStop

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We continue to love Facebook’s valuation opportunity, and the company has registered a 10 on the Valuentum Buying Index. General Electric’s stock price continues to swoon, and we couldn’t have called it better. We used the mosaic theory to anticipate private-equity interest in GameStop. Not a bad trio of calls, no? By Brian Nelson, CFA You will not get as much out of our website unless you read and understand “The 16 Steps” and “Analysis of the Best Ideas Newsletter” first. If you haven’t read about the Dividend Cushion ratio, and you are an income investor, you have to do that, too. We talk about the efficacy of this ratio here. You need a solid foundation on which to build. … Read more

Study: Valuentum’s Best Ideas Newsletter Portfolio

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To read the study, please click on the image to download the pdf document (pdf).