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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: gcrispin who wrote (32574)	10/21/2008 10:07:13 PM
From: Paul Senior	Respond to of 78754

GE: "...it has an excellent balance sheet. If GE continues to fall, the entire market will go with it." This thing is a difficult-to-decipher conglomerate. I claim no expertise regards the balance sheet analysis. I see though they have almost 1/2 $trillion in debt obligations, a debt/equity ratio of 4.9:1. The balance sheet doesn't look excellent to me. On the one hand, if it were so strong, why'd they have give Mr. Buffett such a favorable deal for the preferred? OTOH, the balance sheet IS strong enough that Mr. Buffett quickly determined to take the phone call offer from GE and do the deal. Very roughly and maybe very incorrectly, I divide the company into the key financial sector and an industrial sector. So many financial companies are selling for under book value or at book value and/or pay a dividend greater than GE's 6%. I'm not sure what companies are comparable to GE's industrial - maybe UTX, EMR, DOV. These companies are selling at p/e's which are at or below GE. My point is that while your opinion is that "If GE continues to fall, the entire market will go with it," my inclination is to believe GE could go lower to be where competitors are, and it's maybe not like the old days ala 'as GM goes, so goes the market'. Market could rally and GE remain mired, or GE could fall further and market recover. Jmo, of course. edit: GE is a big component of cap-weighted averages, so if GE falls strongly on company specific news, I have to agree market indexes are affected could/will fall. I'm looking at possible fall of GE against possible fall of other stocks - the entire market of stocks.