Thursday, July 09, 2009

GE Creeps Back Toward Ten Dollars Per Share

General Electric has ever-so-quietly been creeping back down toward the $10/share a threshold that it fell below in mid-February. As with so many financial institutions, after breaching $10 the "wrong" way, it found a free fall that ended with the commencement of the early March Geithner rally. Eerily, the closing low of GE was $6.66 (coincidentally? the intraday low of the S&P 500 was 666). Intraday GE stock actually reached as low as $5.87 before proceeding to nearly triple, peaking out around $15/share in early May. The last two months have seen it fall back to $10.71 at yesterday's close.

As long time TILB readers know, $10/share has been a major price threshold for financial businesses during this crisis. $10/share shouldn't have any particular fundamental meaning, but the psychology of fear has been the motive force during this crisis (and in highly levered businesses that depend on regular access to market-based funding, psychology actually has a huge impact on business value because it impacts the availability and cost of that funding).

While we at TILB do not currently have a position in GE either way*, we did short it from about about $9 to $6.80 last time around (in an unusually well timed series of actions, we implemented the short February 25th and covered March 4th). We rarely "trade" here at TILB (in general virtually everything we do has a multi-year horizon to it), but the $10 threshold has been one of the most consistent trends we have ever seen. Perhaps a second bite at the apple is coming...

It is something that we are keeping an eye on.

* TILB's positions are subject to change and we feel no obligation to inform the world if or when that happens. Investing is inherently risky. Listening to people that write blogs about investing is potentially riskier yet. Caveat emptor.