GE (GE) shares had a real rally this year. They hit a multi-year high in late October. The big company was firing on most cylinders, and earnings for the rest of the year and into 2008 looked good.
But, over the last six months, GE’s stock has been flat. It is hard to explain. Management has sold its new program for growth, and sold it hard. And, the program makes sense.
GE has argued that it will build the infrastructure for the developing world, almost by itself. Turbines, railroad engines, healthcare equipment, even financing. And, why not? Huge countries like China, India, and Russia cannot build all of this own their own. They need a huge supplier of capital, expertise, and advanced systems and technologies. GE is the perfect company.
But, GE’s size and scope got the better of it. While it successfully sold 20% per annum growth in emerging markets, the fact that it has tremendous consumer financial exposure in the US began to make Wall St. nervous. What about the mortgage securities a GE financial unit might have? What about all of its consumer lending businesses?
So, Wall St. has backed off on GE, and will stay backed off. The growth overseas is not a bird in the hand. It is a promise, and a very promising promise. But, GE has problems at home, exposure the the US financial markets
That kind of averages things out.
Douglas A. McIntyre
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