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

To: bruwin who wrote (60515)	3/13/2018 9:38:42 AM
From: Spekulatius	1 Recommendation Recommended By Jurgis Bekepuris Read Replies (3) \| Respond to of 78958

I don’t blame Immelt as much for the bad stock performance (GE was very overvalued when he took over the reign) but for capital misallocation and ignoring the problems in GE finance that have been festering for a long time and probably got worse. Welch was the one who start d the financial engineering and also bumped GE finance to almost 50% of the profits. It just was too easy to take over a financial entity for 10x earnings and then get a 20x PE valuation for it, when under the GE umbrella. Also financials and especially insurance companies are very good picky banks to manage earnings. Immelt generally did some correct moves, but he also spent a lot of money to build up GE Energy (now BHGE), whee he paid top multiples for what turns out to be a cyclical business, rather than spending it on something like aviation like UTC or HON did. Then the buybacks in 2015/2016, which were done mostly from proceeds from asset sales were another huge mistake, because at it turns out, he missed to intentionally neglected the huge gap in insurance reserves that needs a lot of cash to plug it. Then we have pensions, lack of cash flow from aviation and a downturn in power. Not all of it is Immelt fault (note they engine competitor Rolls Royce has cash flow issues too, due to the LT deferred revenue nature of service contracts). but it is the leadership job to have a near term and long term plan and make sure the business has. Enough cash to run. GE needs a three rough cleanup and I doubt that this should be done only by GE lifers that most likely helped create some of the issues that GE is fighting right now.