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PRWCX Position in GE

Does PRWCX have GE stock right? Only VFINX and VTSMX hold more shares. GE is alomost 4% of PRWCX portfolio.

Some commentary:
GE's problem can be summarized in one sentence: The company is burning cash. Hence, other things equal, the company -- and its stock -- should be worth less every day that passes. While that is not true of some Nasdaq darlings, the market's consistent punishment of GE shares over the past decade shows that there is some efficiency left in the U.S. stock markets.
and,
Mr. Market has been dead right on GE. To shore up its balance sheet, GE finalized the sale of its Biopharma division for $20 billion on March 31st of this year. That was probably the worst time in human history to sell a business that focuses on therapeutics -- look at a stock chart of Moderna (MRNA) , Arcturus Therapeutics (ARCT) or Gilead (GILD) if you don't believe me -- but, hey, this is GE we are talking about.
Source:
mr-market-has-been-dead-right-on-general-electric

Comments

  • beebee
    edited May 2020
    PRWCX's manager David Giroux chimes in on GE:
    What about some nonutility stocks?

    We are bullish on General Electric [GE].

    GE is a controversial name lately.

    We didn’t own it until recently. I’ve known [new CEO] Larry Culp for about 19 years, from when he ran Danaher [DHR]. I don’t think Larry has ever failed at anything, and we’re confident he will turn around GE. I don’t own GE for the upcoming quarter or the upcoming year; I’m looking at free cash flow in 2023 or 2024, and think this stock can double or triple over three to five years. It’s hard to find situations like that in the marketplace.
    t-rowe-price-fund-manager-david-giroux-stock-picks-disruption-51570818202
  • edited May 2020
    Thanks bee. In investing, I find intelligent and well intending people can have completely opposite opinions. I guess because at some level it's about predicting the future, which is very hard to do.
  • Charles said it for me. PRWCX is my biggest holding. 30% of total. I trust Giroux, but nobody is perfect.
  • Here are excerpts from a recent article in Barrons. Surprisingly (maybe) many analysis see GE as a decent risk reward play. My figures are crossed for David Giroux decisions since PRWCX is my largest fund holding.
    I know a lot of people don't have the subscription to read so I added some lines from the article below:

    GE Stock Dropped Again. But Here’s What Is Going Right.

    The reasons (for stock collapse) are well known . Demand for air travel has been pummeled by Covid-19, which means fewer General Electric (ticker: GE ) jet engines on fewer commercial jets. What’s more, low interest rates and slower economic growth hurt the GE Capital and Power business units.

    Most Wall Street analyst actually rate shares the equivalent of Buy, so they must see something in the stock. Here are a few positives about the company, and the stock, for investors to consider.

    Larry Culp: ...well respected on Wall Street. Investors don’t have to worry about leadership while they worry about everything else.

    The Balance Sheet: “GE’s industrial balance sheet is currently in a net cash position.” GE has done a lot of work on its balance sheet, paying down debt and selling assets.

    Aerospace: ...expects the commercial aftermarket to recover “fairly quickly” in 2021. Defense is part of the aerospace industry, too, and GE supplies engines to the military. while relatively small, the company’s defense business is still growing.

    Cost Cutting: The cost-cutting started when Culp took over, and more actions are being taken to reduce the size of the aerospace business, preparing it for a smaller future.

    Vaccines: A vaccine or cure would solve a lot of problems for humanity, as well as the ones experienced by the commercial aviation industry.

    Risk and Reward
    Any stock, GE included, is ultimately about balancing risk and reward. The negatives, right now, are apparent, while the positives are less obvious. That is one reason GE stock is stuck. The question for investors now is how will the balance shift in coming months.





  • MikeM said:


    https://www.barrons.com/articles/ge-stock-drops-to-another-new-low-51589490158

    I know a lot of people don't have the subscription to read so I added some lines from the article below
    The article isn't paywalled, at least for now.

  • This is a turnaround play for David Girux. As an investor of PRWCX, I have confidence of his stock selection. @MikeM, thanks for summarizing the fund. Reducing utility stocks for GE is a solid move.
  • Is GE, too "important" to fail even if it may not be too "big" to fail? There is still a GE "financial" right?
  • @VintageFreak. That's good. I'd say same thing for BA.
  • GE sold off the financial unit many years ago I believe.

  • FWIW saying I recently put on a speculative long-term GE options trade as described in the BSW thread for May. At this price, it's worth a gamble with some fun money I think.
  • Ha! A colleague once told me the same thing when Lehman was trading close to $1. He invested $25K of fun money ... and, could not believe when it was gone. But I hope that's not case with GE!
  • GE Finance was a big player in the long term care insurance segment. One of their moves was buying the ltc policies of AMEX around 1995. A large number of these policies provided unlimited coverage. I only know this because both of my parents had AMEX ltc policies, that were acquired by GE and administered by their subsidiary Genworth. The insurance providers thought most of the purchasers would drop the insurance eventually. Turned out that Seniors liked the idea of protecting their assets with ltc insurance, leading to large losses and unexpected billions of dollars in cash infusion by GE !
  • I define fun money as 50~100 bucks. Not sure I'ld buy an historical manufacturing icon just yet though. Not sure anybody wants what they're making. I'ld have to have a lot of money lying around before I'ld take a 25K flyer on a stumbling investment bank.

    If you check the ownership tab at M* it appears to be popular with a number of other funds at TRowe, as well as Fidelity, LongLeaf, and Hotchkiss & Wiley. You can also check out who has bailed completely.
  • I can't believe it never dawned on me that GEnworth had been part of GE.

    I believe they were the last LTC provider to sell policies that you could completely pay for over a fixed number of years. More costly up front to do this, but it protected you from large premium increases once paid off. As carew388 noted, the industry was discovering that it had mispriced policies, so all insurers were implementing massive premium hikes.

    GE spun off Genworth in 2004. However, it was stuck with reinsurance liabilities of at least $15B. Today it still owns legacy reinsurance companies carrying these liabilities.

    The partial divestiture of GE Capital that I'm more familiar with came after the GFC. As part of Dodd Frank, the Financial Stability Oversight Council designated AIG, Prudential, MetLife, and GE Capital systemically important financial institutions. Like TBTF banks, that meant more regulation.

    "In April 2015, GE announced that it intended to sell most of GE Capital over the next 18 months to 24 months in an effort, in part, to no longer be designated as systemically important."
    https://fas.org/sgp/crs/misc/R42150.pdf

    People surely know of Synchrony Bank, formerly GE Capital Retail Bank, and Marcus (Goldman Sachs) Bank, formerly GE Capital Bank. These were some of the institutions that GE Capital sold off. What's left of GE Capital is still owned by GE. It just ain't what it used to be.
  • edited May 2020
    I think Giroux is one of the best managers and why I post about PRWCX so much as a good allocation fund option (with VLAIX).
    I actually bought GE as a trade because of Giroux in 2019 and made money but so far he is wrong.

    A true story, in 2000 I had the pleasure to work with two retired gents from GE and Lucent. The first guy had 6000 shares of GE at 60 each worth $360K and the second guy had $300K in Lucent and that was most of their money. The market was going down in the next 2-3 years and both refused to sell any share. I was begging them to sell. The first guy lost 2/3 of his money, the second guy lost everything. Along the way, each had many reasons not to sell.

    This is why they say keep your winners and sell your losers.
  • "This is why they say keep your winners and sell your losers. "
    Thanks FD1000 . IF Mr. Market keeps it's pedal to the metal ,off to a great start this morning, I may shed a couple of losers.
    Stay Safe, Derf
  • beebee
    edited May 2020
    I am a terrible stock picker. That's why I let mutual fund managers make those decisions for me. I am a disciplined saver. I put money in the hands of fund managers who have a track record of success and then I watch them very closely as stewards of my savings.

    As an investor in their fund, my questioning their decisions is more about me attempting to understand their decision making (and their strategy). This helps me stay the course, especially during the downside of a market cycle.

    Index funds have a different criteria for decision making than managed funds. A stock such as GE may seem, to a fund manager like Giroux, a great candidate for inclusion in his fund. The index (and the rules that govern the S&P 500 Index) may decide to exclude it based on it's inclusion / exclusion rules. This lead to two very different outcomes for the fund manager's fund. The managed fund either out performs the Index (if they were right) and under performs the index (if they were wrong).

    I stopped trusting Berkowitz's decision making and sold out of FAIRX, but I first thoughtfully tried to question his decision making. I attempt to do this with all the managed funds I own because they all come with fund manager risk.

    By the way, Bruce Berkowitz still has a few small pieces of real estate for sale:
    /manhattan-townhouse-near-central-park-hits-market-at-23-million
  • @bee. Good stuff.
  • @msf. Thanks.
  • edited May 2020
    @WABAC. Got it! Me too. But I do a pretty good job of stumbling on my own.

  • I don't gamble in Vegas ... if I'm going to speculate/gamble/"roll the dice" at times using 'fun' money, I'll do it in the stock markets. Sometimes I have better luck that way, too. :)
  • @rforno- same here... :)
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