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The right move for GE

Peter Lynch wrote that once companies reach a certain size, their stock has very limited potential. A company like GE simply can’t double their earnings so how can the stock price double?

Here’s an interesting article on GE, a pretty boring stock that hasn’t done much in recent memory. The article recommends spinoffs and I think that’s the way to go – they often create immediate shareholder value.

For example I remember when Eaton (ETN) spun off Axcelis Technologies (ACLS). Eaton shares stayed the same and ACLS were gravy. I don’t see why the same couldn’t happen if GE spun off its real estate or finance parts.

This entry was posted on Saturday, April 28th, 2007 at 7:40 pm and is filed under Stocks. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

One Response to “The right move for GE”

  1. Sine qua non Says:
    May 1st, 2007 at 12:27 pm

    Hey Jim,

    I’ve just been shopping for stocks to buy with my IRA contribution, and I thought I’d share some of the stocks I came across.

    I screened stocks for low/no long term debt, some dividend (preferably substantial) and a low P/E ratio. What I found:

    ALDA: Aldila Golf Co. (club shaft maker)
    RAIL: Freight Car America; as well as their competitor ARII: American Railcar Industries (rail car manufacturers)
    CHKE: Cherokee Inc. (clothing trademark conglomerate)
    FRD: Friedman Industries (steel)
    USMO: USA Mobitilty, Inc. (wireles communications)
    CAW: CCA Industries, Inc. (skin care products)
    MTEX: Mannatech Inc. (nutritional supplements)

    Except for the railcar companies (at 0.40-0.50% yield), these companies yield from 2.00% to 3.00% in dividends (with CHKE at 6.80% and USMO at 12.10%). And P/E ratios range from 5 (RAIL)to 15 (USMO).

    I bought only the ALDA for its 3.80% dividend and TTM P/E of 8.

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