Thursday, July 10, 2008

Reggie on GE

Reggie Middleton has done a fairly thorough analysis of GE. His picks as to the good bits and the bad bits is not dissimilar to mine. The worst bit is real estate - which he thinks deserves a big write-down.

None of the rest is seriously problematic - but he thinks it deserves low multiples. For some of that - fair enough. For other parts I think GE financial has some truly superior positions deserving of a higher than average multiple. But my disagreements here are minor.

He also puts relatively low multiples on the industrial bit - which he thinks grows but nothing like as much as I think.

In his uber-bearish way he gets GE being fair value now.

I think- and maybe I am just old fashioned - that the infrastructure bit of GE - which grows super-fast and has the most massive tailwind - is worth more than 5% market premium on the average American manufacturing company.

And if the blue-sky bits work (ESBWR reactors, Cameco JV, ultra light jet engines etc) then a 5% premium will seem very light.

And that is the extent of our disagreement.

If you are into GE I recommend reading Reggie's piece.

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