Is GE REALLY Fourteen Dollar Stock?

24 11 2008

 

Pat and I do not invest heavily in the stock market.  We have some investments that are in very “conservative” Index funds.  Like everyone else, we have been killed on those investments over the past year. 

My expertise is mortgages and real estate and I can tell you with certainty that I am NOT an expert on the stock market. 

At the same time, I do casually follow it and some things simply don’t make sense to me.

As an example, General Electric has been a bell weather company for decades.  It has been a $40 stock for a long time.  Now it is trading at $14.  Is it really a $14 stock?  Has General Electric’s business changed that much in the last year?  Perhaps it has.  My dad retired from General Electric.  It has been around forever.  They are in everything.  I wonder with you if the market hasn’t over reacted. 

Another example of this is a company I am fairly familiar with called XELR8.  The stock symbol is BZI.  I know the founder and the key leadership of this company.  They are very sharp people and they appear to have a sound business plan.  The last time I looked at their stock it was trading for 27 cents.  Early this year the same stock was selling for about $1.60.  During that period they have increased significantly sales, they continue having no debt, and they seem like a well run company.  I suspect the 27 cents is not really reflective of their true value (just as the $1.60 might not have been). 

There are examples after example of these types of situations in the marketplace.  I wonder if it would make sense for a long term investor to take some differential funds and buy a few of these opportunities.  I have a hunch it would make sense with 5-10% of your portfolio – especially if the opportunities were an area you had significant expertise in. 

I am just thinking on paper here.  Got any thoughts for me?

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