At mid-year, there was a great deal of excitement about the market’s changing and positive impression of GE (GE). The shares had moved from under $34 to $42.15.
The nice run was caused by three things. The first was the GE management convinced Wall St. that the company would provide infrastructure to much of the developing world. Investors had visions of multiple-billion dollar contracts from India, China, and other large countries in a hurry to have all the plane, trains, dams, and roads that the US has.
Investors also felt that GE was in the process of selling off its dogs. Operations like the company’s plastics unit were seen as pulling down overall performance.
Finally, the market was becoming convinced that there was nothing dangerous on the balance sheet of the big GE financial services operations. No surprises. Nothing to drive an unexpected hit on earnings.
To some extent troubles with the expansion of the world’s economy have brought on concern about GE’s growth overseas. It still has units that bother Wall St. NBC Universal probably falls into that category. And, the GE financial units may well have modest credit card or mortgage default surprises
Over the last year, GE shares are now off almost 5%.
Easy come, easy go.
Douglas A. McIntyre
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