JPM Upgrades GE For No Reason, Just "Sentiment" And "Investor Numbness"
A month ago, Goldman had no idea how to run the market higher so it quoted Barney Frank as a reason to upgrade GE and cause some serious squeezage. JP Morgan, which prudently sensed that the equity market being a derivative of the dollar weakness needs some substantiation, came out with a comparable GE upgrade last night, raising its target price from $12 to $17, not on anything as fundamental as a quote by a Congressman, but merely "on sentiment, as [it is] one of the last stocks for which a little good news can still go a long way. In the look for non-consensus, catch-up stories, GE stands out as the last, in our view." And it turns out potential upside momentum is good for a 40% increase to a multi-billion company's target price.
In other words, momentum chasers - meet your patron saint - Stephen Tusa, CFA.
Stephen, true to his CFA designation, does admit that the troubles at GE are merely starting to unravel, with concerns including "(1) provision/impairment levels, (2) rising funding costs, (3) regulator uncertainty, and (4) mark-to-market risks (CRE), all of which add to questions around LT earnings power."
Yet, with AIG, FNM, FRE and C already having been gunned well beyond what their bankrupt state allows them to be priced on any gravitationally challenged stock market, the only company that JPM could make a viable momo case for, apparently was CNBC's parent.
We wish momentum chasers all the best as they fall for this oldest trick in the book. We also would like to point out that any "numb" investors who buy this stock just because the 2 guys to your left are numb (and dumb) from all the bad news that will start pouring out soon, will be much number when they see their unrealized P&L on this position in a few months.
(4 votes)
on Tue, 09/08/2009 - 08:55
#62161
The market is going to infinity just because.
on Tue, 09/08/2009 - 08:58
#62165
Did they honestly use the title of the Pink Floyd song about a recreational drug-induced coma?
How appropriate!
on Tue, 09/08/2009 - 09:23
#62180
wow. i mean - WOW. thanks for pointing that out. This is the epitome of everything that's going on in today's market... COMFORTABLY NUMB! unreal
on Tue, 09/08/2009 - 09:24
#62181
Perhaps that is the irony of the note. The last chance to push stock onto the comfortable numb buyers.
on Tue, 09/08/2009 - 08:57
#62163
payback for the favorable press JPM and Jamie get on CNBS
on Tue, 09/08/2009 - 08:58
#62166
Was that report posted on The Onion?
on Tue, 09/08/2009 - 09:36
#62191
HAHAHA
Unlike Fannie, Cit, etc, at least GE has a P/E ratio.
on Tue, 09/08/2009 - 08:59
#62167
In reality, that's probably the most honest sell side report I've read in a while. The guy basically says, F' it, this sucker is gonna pop as retail looks for the last nugget.
on Tue, 09/08/2009 - 09:01
#62172
Well YTD obama has successful monetized hope, so what is wrong with JPM suggesting the monetization of sentiment vis a vie GE?
on Tue, 09/08/2009 - 09:06
#62174
http://www.youtube.com/watch?v=P5wcLl13a8s&feature=related
on Tue, 09/08/2009 - 09:07
#62176
The DOW 30 stocks will be upgraded by the rate of one stock per day to sustain the bull market.
on Tue, 09/08/2009 - 09:08
#62177
GE has really taken off. A few months ago I was taunting Warren Buffet for making such a loser investment. Oh wait, it still was. My wife owns GE and will be pleased as punch for it taking off.
on Tue, 09/08/2009 - 09:26
#62183
I suspect that JPMorgan upgraded GE because they have an important client that needs to unload.
The analyst basically said he was upgrading GE because it was trading poorly compared to the rest of the market. So, ok, let's buy weak stock. There's a reason for the upgrade but that ain't it.
on Tue, 09/08/2009 - 09:32
#62189
no - because GE IS an important client who needs to unload - there is mention in the note of a $10B "infusion"... secondary perhaps?
on Tue, 09/08/2009 - 09:47
#62197
probably the insiders want to unload their GM holdings.
on Tue, 09/08/2009 - 09:26
#62184
Moin from Germany,
compared with this comment quite "harmless" ;-)
via Bloomberg
http://www.bloomberg.com/apps/news?pid=20601087&sid=aKcioT31yV_E#
Based on analysts’ forecasts for 2010, the S&P 500 trades for 13.5 times income, the lowest since 1989 when compared with the trailing P/E ratio before Lehman Brothers Holdings Inc.’s collapse a year ago.
on Tue, 09/08/2009 - 09:31
#62187
circlejerk
on Tue, 09/08/2009 - 09:35
#62190
The rigorous nature of obtaining a CFA is what qualifies Tusa to put out an OW on GE. It is my understanding that the "Just 'Cuz" segment of the test is the most obtuse and difficult by far. Bravo.
on Tue, 09/08/2009 - 09:48
#62199
More wodak, comrades; this numbness is insufficiently comfortable for trading via mouseclicks.
on Tue, 09/08/2009 - 09:55
#62203
check out the short position in GE and that will tell you why JPM upgraded GE. Pull out the juice machine and sqeeze.
on Tue, 09/08/2009 - 21:28
#63075
They truley are the perfect gun.
http://www.last.fm/music/MC+900+Ft+Jesus/_/Dali%27s+Handgun
on Tue, 09/08/2009 - 09:59
#62206
How creative. This opens all kinds of doors for ratings possibilities.
___________
North American Equity Research
20, September 2009.
General Electric Co.
Previously Over Weight
Down graded to Coyote Ugly- I bought this stock when I was comfortably numb, woke up next to it in bed, and am now willing to chew my arm off to get out of it.
on Tue, 09/08/2009 - 10:02
#62212
Speaking of underperforming investments, isn't it about time someone upgraded the dollar as an investment? I guess not, because that's one of the only ways to hurt the market.
Big laugh at an upgrade of GE before any cap-and-trade bill even gets through Congress. GE is counting on that to be their payday.
on Tue, 09/08/2009 - 12:14
#62389
my political prognosis...cap and trade will not happen.
that is all.
on Tue, 09/08/2009 - 10:14
#62223
"comfortably numb investors" is just a euphimism for greatest fool.
fools be warned.
on Tue, 09/08/2009 - 13:00
#62447
what a joke this market has become
for weeks now they have been upgrading every sector or name they can find "just because" they can
thanks for pointing it out.
on Tue, 09/08/2009 - 15:42
#62737
The thing that's funny about the report is that there's no inquiry whatsoever into loss rates at GE Capital OR industrial demand relative to GE's capacity. Either one could sink the company, and given the complexity of the situation you would think an analyst would look at least a little bit into maybe one of these topics.
Essentially you have GE's industrial business as an asset-light, cash-flow driven business and GE Capital as an asset-heavy, leverage-driven business (driven by the margin between GE's cost of capital and return on investments). It doesn't take much higher percentage losses for GE Capital to start absorbing all of the industrial business's cash-flow and for the leverage to start to be a negative. Likewise, if it looks like GE's industrial business is not going to produce enough cash to support the Capital business through this time, funding costs will go way up. But apparently neither of these cases is important because this analyst doesn't find them that likely for...what reason?
Realistically, GE isn't good for any huge percentage gain off today's price, with a significant risk of losing all your money. If the likely outcome is that they limp along with:
1. Reduced credit rating.
2. Low dividend.
3. Regular diversion of industrial cashflow to support poor Capital investments.
4. Poor industrial demand
why would a rational investor accept the downside risk? You can invest in better banks that you know the government won't allow to fail, rather than a hybrid industrial/financial with a totally uncertain future. JPM itself is a much more attractive stock than GE.
BTW, if you take a look at the industrial portfolio, GE has some very impressive products and is a leader in many important markets. It's really a shame that past management levered up a Capital company rather than focusing on returning the cashflow from these products directly to shareholders as dividends.
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