Posted on 09/03/2009 9:06:17 AM PDT by BenLurkin
In early July, Charles Ortel, managing director with Newport Value Partners, told Tech Ticker General Electric's stock is only worth $2 per share. Since that appearance, GE agreed to pay $50 million to settle SEC fraud charges and Goldman Sachs upgraded the stock to a 'buy' saying the company won't have to split off its financing arm, GE Capital. The shares are up from under $11 to more than $13 today.
Regardless, Ortel is sticking to his bearish guns: "Absolutely," he still recommends GE as a short. In fact, "the situation is even more dangerous now," he claims.
Ortel's research shows GE Capital is still "massively overleveraged," especially considering the risk that rising nominal interest rates could create a second wave of the financial crisis. "You have a total amount of debt at GE Capital that is $498 billion," according to his data. "To put that number in perspective, the total external debt of Brazil is $160 billion."
It's in that same vein Ortel is wary of another industrial behemoth, Boeing. He says the combination of "skinny profit margins" and "leveraged customers" in a landscape of economic turmoil and a potential swine flu outbreak - which could ground air travel - adds up to a company he recommends avoiding.
Bottom line: "Any company that basically assists its customers to buy its products using leverage is a company that we think has a broken business model in 2009-2010."
(Excerpt) Read more at finance.yahoo.com ...
GE — aren’t they also rabidly left-wing? And own NBC?
Somebody Ping the Dave Ramsey List with this!
Cash for Refrigerators....
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