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No. of Recommendations: 3
I'm not a cheerleader for GE, but I have owned it since $7, adding shares over the years so my average cost is now $17.82. Yes, I do kick myself for not going all in at $7. They had just slashed the dividend and the negative analysts comments sounded a lot like today.

Value Line just issued their quarterly review. They expect minimal growth in the next year. The asset sales and restructuring will be messy. But they do recommend the stock for income investors and they remain positive on long term appreciation. Their median projection for 3 to 5 years out is 90% price increase. That potential plus the dividend, which is still well above the average yield, will keep me in the stock for now.
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Thanks for sharing that, billjam.

Rob
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Very interesting but earnings report if clean and showing progress will tell a lot about 2018. I'm optimistic on CEO and his team.
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Does the new info regarding the long-term care insurance charges, which effectively blocks GE Capital dividend contribution to parent company, change your thesis? I'm wrestling with whether to hang in, or take my losses and flee the scene to greener pastures.

If I stay in, I expect more bad news on the earnings call, followed by further drop in share price, possibly another 10% or more from current $16.xx level. That will provide a nice buying opportunity to potentially lower my cost basis significantly. According to Morningstar, "GE dominates every market they are in". A streamlined company consisting of Aviation, Healthcare and Power (with end-market improvement) would be appealing and should be able to deliver profits over the coming years. But it may be a long and painful holding period to get there, possibly with further dividend cuts (potentially to zero?) and possible delisting from the Dow. Enough to test the mettle of any long-term investor. The fundamental issue I'm wrestling with is weighing future recovery potential versus opportunity cost over the time required to realize a recovery.

What are other Fools thinking?

NR
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If I stay in, I expect more bad news on the earnings call, followed by further drop in share price, possibly another 10% or more from current $16.xx level. That will provide a nice buying opportunity to potentially lower my cost basis significantly.

What are other Fools thinking?
-- NR

What am I thinking?

I'm thinking "Why would someone want to invest in a troubled company that will take many years to fix itself (ASSUMING it is successful) when there are so many companies executing amazingly well and creating wealth for shareholders instead of destroying it?"

To me, it seems self destructive. Perhaps not quite so destructive as an alcoholic taking his last dollars to the liquor store, but pretty close. IMO.

Rob
He is no fool who gives what he cannot keep to gain what he cannot lose.
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I have lost my ass in GE twice, the last time this past fall. After Flannery's presentation to the analysts in November and his subsequent comments in a CNBC interview went over like passing gas in church, I took my beating like a man at $18.31 and got out, fearing that any more bad earnings reports or analysts meetings or other bad news items would flush it, possibly to $15 or lower. It's now a helluva sight closer to $15 than it is to $18.31 and is dropping like a bomb, and after the rumors and analyst comments I have been hearing in recent weeks, my balls are far too small to touch this with a 10 foot pole. Trust me, we haven't seen the bottom on this one yet, and my balls are even far too small to speculate on how low this turkey could go if the stuff I'm hearing turns out to be factual.
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rinjr....aka Ivan the Terrible :), with all the bad news it's hard to see how an investment in GE will *LIKELY OUTPERFORM* the better performing companies. If so, why continue to own GE?

Don't sell due to taxes?

Ha!

Long term capital gains tax is not a big deal compared to opportunity cost. I learned that 30 years or so ago when I held Commodore Computers too long because I was afraid of *short* term capital gains rates. With long term, it's even more of a no brainer. IMO.

Anyway, I don't hold GE shares so I have no dog in this situation.

Rob
He is no fool who gives what he cannot keep to gain what he cannot lose.
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NR -

Thoughts:

1 If you can't explain why General Electric is a fifty-cent dollar, sell. You can always repurchase your shares later, once the dust settles. As I pointed out in a letter to the editor that Barron's published a few months ago, GE has a negative tangible book value.

2 Selling "problem children" clears the mind, and frees up precious mental energy for other tasks which have more promising outlooks.

3 You do not have to make it back the same way you lost it.

4 Never turn a small loss into a big loss.

5 For behavioral reasons we hold on to our losers too long, waiting to get back to even. If you are waiting to get back to even, this is the wrong reason to continue owning these shares.

6 Always predetermine how much you are willing to lose before you buy the stock. This way you are less apt to get emotional about losing stocks.

7 Going forward, never lose more than minus one-times risk. If you estimate a company's intrinsic value at $55 per-share but the stock is forty due to temporary bad news, your reward is $15. Now, how much to risk? Many superinvestors advise that we invest probabilistically. Munger, for example, explains his job in racing terms: He wants to bet on a horse that has a fifty percent chance of paying three-to-one. So here, divide $15 by three and you get $5. That's your risk. You bet $5 to make $15, but if you lose $5, sell. So if the stock falls below $35, sell. You are at minus one-times risk. Sure, maybe the company is cheaper at $35 than $40. But perhaps someone else knows this company better than you, so the stock price reflects news that you aren't privy to yet. Take this framework and apply to General Electric. What is your estimate of intrinsic value? What is your reward? Where is your stop-loss? (Typically, I use cost basis minus one-third of reward.) If GE's shares are below your stop-loss, sell.

8 Read Lee Freeman-Shor's excellent The Art of Execution.

Hope these ideas help. Been there...

Hewitt
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Thanks for dropping by, Hewitt! We appreciate your input of common sense.

If you can't explain why General Electric is a fifty-cent dollar, sell. -- hh (emphasis added)

And "explaining" goes well beyond something like "the new CEO will turn things around!". ;) Which is something that often appears on this board.

Rob
He is no fool who gives what he cannot keep to gain what he cannot lose.
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Thanks for taking the time for this thoughtful response. Much appreciated.
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Thanks, Rob.

And "explaining" goes well beyond something like "the new CEO will turn things around!". ;) Which is something that often appears on this board.

Good point!


hewitt
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Thanks for the help from everyone. GE was 5% of my port, and now is 2%- 2008 to now; and I have been reinvesting dividends all along, so those are gone (except those invested between $9 and $16.

I'm listening to all of the wise advice above (BTW, hh, do you have a link to your Barron's letter?), but also thinking of the TMF study where they would have been better off had they never sold anything. I'm also seeing this as a personal challenge to buy and hold- selling at the bottom seems like a classic mistake.

Now, those are general considerations, but the company specific issues may override all of that. SEC investigation takes the cake today and is a huge red flag. But who is going to own all of these engines, oil and gas business, wind turbines, CT and MRI scanners, and the servicing of all of these expensive and critical machines?

Is bankruptcy on the horizon in your opinions? What is the probability holders will have nothing left of this company? Spot
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...also thinking of the TMF study where they would have been better off had they never sold anything. I'm also seeing this as a personal challenge to buy and hold- selling at the bottom seems like a classic mistake. -- Spot

Those studies just say "the stock went up later". They don't evaluate whether selling the dog was a good idea because you've re-invested it in a winner. So those studies can be a bit misleading.

Rob
He is no fool who gives what he cannot keep to gain what he cannot lose.
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Those studies just say "the stock went up later".

To say nothing of the fact that eventually we all need to sell something, or what's the point of investing.
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To the Editor:

Every time a purported blue chip like General Electric causes massive stock market losses, it’s helpful to try to identify clues that would have told us to get out ahead of time (“What GE Holders Can Do Now,” Striking Price, Nov. 18). Here are a few: 1) return on capital for the past 10 years averaged just 5% to 6%; 2) no growth in intrinsic value (per Morningstar); 3) multibillion negative tangible book value; and 4) price 200-day moving average went under $29.50 in April 2017. Superinvestor Paul Tudor Jones’ favorite technical sell indicator also signaled danger in 2008 at $28, before GE’s stock plunged to below $6.

https://www.barrons.com/articles/letters-to-barrons-15115767...
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