The Briefing Room
General Category => Economy/Business => Topic started by: SirLinksALot on June 20, 2018, 01:47:01 pm
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SOURCE: CNN Money
http://money.cnn.com/2018/06/19/investing/ge-dow-jones-walgreens/index.html (http://money.cnn.com/2018/06/19/investing/ge-dow-jones-walgreens/index.html)
by Matt Egan
For the first time in 110 years, General Electric will not be a member of the elite Dow Jones Industrial Average.
S&P Dow Jones Indices announced on Tuesday that the iconic maker of light bulbs and jet engines will be replaced in the 30-stock index by Walgreens Boots Alliance.
GE (GE) was an original member of the Dow in 1896 and has been in it continuously since November 7, 1907.
Being ousted from the Dow is the latest indignity for GE, which is dealing with a serious cash crisis caused by years of bad deals. GE has replaced its CEO, slashed thousands of jobs and cut its coveted stock dividend in half.
Last year, GE was the worst-performing stock in the Dow, losing almost half of its value. GE is down by another 25% this year.
"We are focused on executing against the plan we've laid out to improve GE's performance," a GE spokeswoman said in a statement. "Today's announcement does nothing to change those commitments or our focus in creating in a stronger, simpler GE."
To pay down a mountain of debt, GE is selling off long-held businesses. Last month, GE agreed to sell its century-old railroad division. GE is also searching for a buyer for its struggling light bulb division.
GE's stock plunge helped lead to its exit from the Dow. That's because the Dow is price-weighted, meaning that GE's $13 price tag had little impact on the index. S&P noted that GE had a weight of less than half a percentage point.
(Excerpt) Read more at above link....
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Jack Welch is watching his fine accomplishment wither away.
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Jack Welch is watching his fine accomplishment wither away.
Immelt just melted down the entire company into scrap with his little quixotic ventures and plays.
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I'm not really convinced that GE's removal from the Dow is a bad thing in the long run. While a negative in the near-term [for GE], please note that recent removals from the index have gone on to outperform the DJIA in the 12-months following the announcement
One thing this news tells us is that GE's industrial manufacturing days are over as the economy shifts to a more service orientation.
Time and time again, new trends replace old ones in the Dow. For example, take Cisco replacing General Motors in 2009 or Nike replacing Alcoa in 2013.
In fact, most other recent removals from the Dow before General Electric soundly outperformed the S&P 500 in the year after getting booted, according to CNBC data.
AT&T shares rose 15 percent in the 12-months after it got replaced by Apple in the Dow versus the S&P 500's 2 percent decline in the same time period.
Alcoa's stock soared even higher with 96 percent return in the year after its exit.
(https://fm.cnbc.com/applications/cnbc.com/resources/editorialfiles/charts/2018/06/1529500686_dowexilenew.PNG)
It seems that by the time the index committee acts to remove an underperforming stock, most of the fundamental deterioration is already PRICED INTO the shares and so you see a rebound.
GE shares fell as much as 3 percent in after hours trading following the decision Tuesday. After opening lower on Wednesday, the stock rebounded to near positive.
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Immelt just melted down the entire company into scrap with his little quixotic ventures and plays.
Don't forget the back up private jet that followed Immelt around just in case he needed a loaner.
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I'm kicking myself. My mother left me some GE shares and I haven't been diligent in watching the market. Pretty soon, perhaps, GE will be worth nothing. Sell now? Or hope for the best?
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GE is heading the same way as Zenith. Once it hit's 0.50 cents a share the fat lady will sing.
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I've heard some statistic where over any 30 year period you choose, if you were invested in the Dow (or S&P?) you would have made an average of 8 or 11% per year. [Yeah, my memory's pretty fuzzy on the details, but you've probably heard this too from the buy and hold crowd].
Recently I've began to wonder about this. The underlying economy doesn't grow anywhere near that rate, so why would stocks? Maybe publicly traded companies outperform?
Or maybe it's a "scam". If my portfolio contains GE and it tanks, I lose money. But if GE tanks, does the Dow simply replace it with Walgreens and not show a loss? Do the markets show favorable performance simply because they get to include the winners and reject the losers?
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I'm not really convinced that GE's removal from the Dow is a bad thing in the long run. While a negative in the near-term [for GE], please note that recent removals from the index have gone on to outperform the DJIA in the 12-months following the announcement
One thing this news tells us is that GE's industrial manufacturing days are over as the economy shifts to a more service orientation.
Time and time again, new trends replace old ones in the Dow. For example, take Cisco replacing General Motors in 2009 or Nike replacing Alcoa in 2013.
In fact, most other recent removals from the Dow before General Electric soundly outperformed the S&P 500 in the year after getting booted, according to CNBC data.
AT&T shares rose 15 percent in the 12-months after it got replaced by Apple in the Dow versus the S&P 500's 2 percent decline in the same time period.
Alcoa's stock soared even higher with 96 percent return in the year after its exit.
(https://fm.cnbc.com/applications/cnbc.com/resources/editorialfiles/charts/2018/06/1529500686_dowexilenew.PNG)
It seems that by the time the index committee acts to remove an underperforming stock, most of the fundamental deterioration is already PRICED INTO the shares and so you see a rebound.
GE shares fell as much as 3 percent in after hours trading following the decision Tuesday. After opening lower on Wednesday, the stock rebounded to near positive.
Interesting enough, they are up today on the news.
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GE is up almost 8% since being booted.
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GE is up almost 8% since being booted.
Just a dead cat bounce. Like most of your posts here.
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Just a dead cat bounce. Like most of your posts here.
What does that add to the conversation @Wingnut . Nothing and it just rude and untrue.
Thanks for what you do @AbaraXas
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What does that add to the conversation @Wingnut . Nothing and it just rude and untrue.
Thanks for what you do @AbaraXas
Give him a reach around when you say that.
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As moderator of this group, I have to chime in.
Please, no personal attacks or taunts. Keep to the topic at hand.