GE’s Biggest Day of a Lifetime (GE)

General Electric Co. (NYSE: GE)  may have moved more today on a percentage basis than in any single day in many investors’ lifetimes.

GE’s move was for two reasons.  The first is because late Friday Jeff Immelt hinted that the conglomerate might cut its dividend.  He didn’t formally say that, but he certainly implied it.  I argued on CNBC late last month that GE could save $5 billion per year if it cut the dividend in half.

The second issue is that GE will benefit from the  government stimulus package and the Treasury financial bailout package due out tomorrow.  These are known by most, but this stock unfairly punished given its current situation.

We saw a 13.6% move in December 2008.  And from the low to high, not counting the closes, there was a larger move than that in a two-day period.  But today’s 13.87% gain to $12.64 may be the largest one-day gain in many many years.  The gain in December was a 30-year record.  Today’s gain was larger.  CNBC went all the way back to 1962 and had not found a day where GE had risen this much.  Most traders and investors were not trading and investing back in the 1970’s, let alone the 1950’s.

We feel that GE will cut that dividend with a 95% certainty after Q2.  It has a “AAA” debt rating to try to maintain.  But here is our other call… If you buy GE you have to understand that the ratings agencies have already announced actions.  They haven’t formally downgraded the debt rating, but if you live by reading between the lines it doesn’t take a rocket scientist to guess what the next most likely move is more likely to be a few months out.

Shares closed up 13.87% at $12.64 on more than 230 million shares.  Its 52-week trading range is $10.66 to $38.52.  Today’s move added roughly about $14 billion in market cap.

Jon C. Ogg
February 9, 2009