GE Aerospace (GE)

Has had a very tough go over the last 15 years. He hasn't been involved for many, many years. They had just been buying and selling properties that made no sense, and are just starting to get out of the hole. It’s been thrown on the value heap. There will be a time of resurrection, but you don't want to spend too much time with dormant or dead money before that Renaissance, which won't happen for a while.

Hold or Sell? This has probably bottomed now, given that the new CEO has come in. He cut the dividend quite dramatically, and intends to sell more assets. Their core power business is not doing very well and will take a number of years to rectify. If you are a very long-term investor, and have ridden out the pain, it likely has bottomed and things can only get better going forward. Prefers United Technologies (UTX-N).

Probably has a $1 to $1.50 of earnings power. At the current price you are paying 14 or 15 times. From a Value standpoint it’s fine. Airplane engines and power plants are not going away. He wouldn’t object to owning this at the current price, but would Sell it if it got over $22-$23 in the short term.

Recently sold his position. They have exposure to some very good parts of the industrial sector, such as aerospace, power generation, renewable power, healthcare, etc. In spite of this, the company is not doing well. Cost control has not been great. The amount of debt on their balance sheet is significant.

A little concerned about the progress management is going to be able to make as they prune the portfolio trying to right size it. After years of growing by acquisition, focusing on energy and relying on GE Financial, he worries at a stock trading at this price and supposed to generate $1 in earnings. They’ve cut the dividend. There’s a lot of work to be done. It looks like the end markets are struggling. It’s probably going to take several quarters before the turnaround starts to work out. You really want to see organic growth before you get excited. There are better risks/rewards in other industrials.

It is shocking how terrible this company has been for shareholders. The balance sheet has always confounded him and the growth wasn’t there. They have some amazing businesses and should be making a ton of money on their aerospace division. Expects that over the next several years there will be a break up of this company with a spin out of different companies. It is extremely hard to analyse.

Has a new CEO, and all of a sudden people are selling like crazy. The new CEO bought about $1 million worth of shares, which is a good sign. They are looking to sell off a lot of assets. Has a big debt load, so it would be good to pay it down. There are going to be huge changes over the next few years. A great company with some great components, but there are going to be some major write-downs coming, and that always discourages investors. The dividend just got slashed in half.

Has been looking at this for signs of when it will be cheap enough and when there will be capitulation, where everyone throws their hands up. You buy this when there is blood in the streets. Chart shows it is still dropping. You want to see some kind of a spike in volume. Volume has been going up, but expects there will be more capitulation/selling coming in. With about $1 a share of earnings, it is still not cheap enough.

Recently sold this from his taxable accounts for tax loss, with the intention of buying it back after 30 days. A new CEO has come in and the market was disappointed, but he doesn’t know what they were expecting. You want a CEO to “under promise” and “over deliver”. Investors are looking for a CEO who will “overpromise” and “hopes he delivers”, which is not realistic. He isn’t upset that the CEO is under promising to start with. Thinks it is going to take 2 to 3 years for the new CEO to prove himself. His new clients are buying this.

Wouldn’t bother with this. He doesn’t understand a lot of their decision-making right now. Just had their analysts’ day and have been pushing really hard to say they have to sell rail right now, when they are making it very clear to everybody that it’s the bottom of the cycle. If they have to sell those assets and are admitting it’s the bottom of the cycle, that says something about their balance sheet. If you own, he would get out.

This is a mess, and not one that any individual is going to solve in a quarter or 2. Monday is a very important day, because they are doing an investor presentation. Earnings are likely not going to be much north of $1 a share. Their cash flow is in terrible shape. If they cut the dividend, which he expects, and lay the groundwork for a long-term recovery, the stock might have some legs into the low $20s. He wouldn’t want to be involved in its early days.

Has been a disappointing stock. It is pretty phenomenal what’s been happening with the company. The cash flow is going to be about half of what they originally guided. Then you start wondering if the dividend is safe. The plan for the new CEO is to start selling some assets and get the balance sheet debt down. It’s always tough with these types of turnarounds to see how successful he is going to be.

Looking at the relative performance of the industrial sector, it has really struggled to break out. However, underneath the surface, machinery has been unbelievably strong, aerospace and defence has been incredibly strong, electric components has recently broken out. What held the sector back are the conglomerates, which includes General Electric. They had a very sloppy quarter and not all questions were addressed. This is definitely not the time you would buy this.

Had never liked this because GE Capital masked a lot of the other returns, so the stock used to trade at a huge multiple because of their so-called stable earnings. It was a massive finance company that could manipulate the earnings. In 2008, it became unstable. They have a new CEO who has to 1) take a lot of costs out, 2) sell a lot of businesses and 3) cut the dividend. They’ll be having their investor day very soon, and thinks they should cut the dividend. Probably a great buy between $15 and $20.

He would stay away from this at this time. Think of it as the Titanic trying to turn like a speedboat. A mega company that is making major, major changes, especially in terms of selling assets and acquiring businesses. A couple of years ago, they sold off $70 billion of their GE capital assets. That allowed them to give up their banking charter and lower their capital requirements. Throughout all this, they did the largest acquisition in history, which they are still trying to digest. There are a lot of integration risks.