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Strategies & Market Trends : Roger's 1998 Short Picks
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To: Ryan Hess who wrote (18659)2/21/2001 8:11:32 AM
From: Mark Marcellus   of 18691
 
I've been considering GE also. It's definitely more work than some of the fly by nighters, but you are also not subject to the vagaries of manipulation or difficulties in getting a borrow. Plus, a large majority of the real junk is now trading below $5, which makes them too much trouble for some of us.

GE has a long history of managing earnings and their long time CEO is retiring this year. It is fairly common for the whole managed earnings house of cards to collapse in the aftermath of a CEO departure, especially because there is a tendency for all the earnings strings to be pulled in the CEO's final year so he can leave on a high note. On top of this, GE is merging with Honeywell, a company which has also been suspected (in some quarters at least) of massaging the numbers.

Having said that, the homework required for this one is formidable. You'll need to analyze all the GE pieces (with special focus on GE Capital, IMO). Then you'll need to try to untangle the aftermath of the Honeywell/Allied Signal merger and, to paraphrase Gertrude Stein, try to see if there is any there there. Perhaps the right strategy is to wait until merger time approaches and hope the price gets pumped up as the deal is being put through.

I don't know if I'm going to get comfortable enough to bet real money on it, but I do consider it highly likely that this stock will go for much less than its current price within the next year.
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