Reader Email Regarding GE & O'Reilly

A few days ago, I received this email from a viewer of the segment on Bill O'Reilly's Fox News program on which I appeared last month.

It Seems Many Do Not Agree with You-see Times Article
From: Art Effron (email withheld for privacy reasons)
To: CNeul@aol.com
Date:Sun, 4 May 2008 9:47 pm

THIS E-MAIL WAS SENT TO BILL O'REILLY TODAY
Bill-
It seems your info relative to Jeff Immelt is quite flawed:

GE IS NOT losing money
GE IS rated very highly among most creditable business and financial institutions
GE has NEVER MISSED a dividend in the history of its existence.
Most business and financial experts recommend GE as a very reliable investment (call your broker).
Your expert,Charles Neul, hasn't the slightest idea about GE and his views have absolutely based on faulty input.
GE's stock has not performed as we would like but only missed its projection in the last quarter.
GE manufactures many medical electronic devices that has saved many lives (maybe some of your family).
Have you really checked on Mr. Murdock's business activities as it related to Iran ?
Jeff Immelt has proven to be one of GE's most successful CEOs(check his track record as to his many
accomplishments).

Bill, I really hope your E-Mail screeners show you my E-Mail.

You are way too smart to believe some of the background information passed to you as true.

Art Effron (email address and phone number withheld)

I wrote in reply,

Dear Mr. Effron-

It's evident from your ranting email that you understand little, if anything, about my approach to equity performance analysis, as expressed on my blog, or the manner in which most successful portfolio managers seek to outperform the market.

The bulk of your points have nothing to do with GE's, and Immelt's inability to earn a total return for its shareholders which is better than that one can achieve by simply buying and holding an inexpensive S&P500 Index fund from one of many fund complexes. Some of your points, while perhaps true, are irrelevant to the matter at hand, i.e., has GE, under Immelt, outperformed the S&P, or not? To paraphrase a business partner of mine,

'Just because we might want to buy a company's products does not mean we want to own it's stock.'

For your information, as I have noted in several posts on my blog regarding GE, my information source for data on GE's performance is from Compustat, which is considered to be the leading institutional-quality source for fundamental and technical data on publicly-held companies. My information regarding Immelt's compensation is either directly from the Wall Street Journal or Forbes, both considered reputable and unimpeachable information sources.

As I mentioned on Mr. O'Reilly's program, the reason many in the media or investment circles do not criticize GE involves their not wanting to see their share of GE's large volume of corporate spending evaporate.

You would probably do yourself a favor in terms of your own credibility if you first gained a better grasp of the issues which were discussed on O'Reilly's segment on GE. Until then, it might be prudent of you to cease broadcasting your naivete.

-CN

I'm not sharing this email and my reply just for fun. Mr. Effron's email provides at least one answer to Mr. O'Reilly's question of me about GE's equity,

"Who would own this stupid stock? Who would buy it?

People who think like Mr. Effron.

'Investors,' and I use the term here very loosely, who mistake profits and the nature of a company's businesses for its ultimate delivered benefit to shareholders- total return.

And, in an ironic way, the fact that people like Mr. Effron choose to continue holding GE is what helps it remain a mediocre performer.

You see, if a lot more investors sold the stock now, it's price would, of course plummet even further than it has in the past year or month. But as the price dropped, it would probably reach a level so cheap that some 'value' investors would begin to accumulate the equity.

Then, GE's continued so-so fundamental earnings performances might justify more investor interest, and, thus, a short-term rise in the stock's price and, with it, a higher total return.

That so many GE shareholders continue to hold it, in effect voting every day to 'not sell' the stock, supports its price in the face of mediocre earnings performances.

The smart money, as I wrote of the sellers of regional bank equities in this recent post, has already left the building in GE's case.

The remaining shareholders would seem to have motivations, valuation and performance criteria similar to those of Mr. Effron.

And that, my friends, is what makes markets. Different views of and valuations for the same instrument.

In this case, we're fortunate to have one of those, in Mr. O'Reilly's words, 'stupid enough to own this stock' actually tell us why he does.