General Electric

  • 26 Oct
    Buybacks Destroy Blue Chip Stocks, GE Is A Prime Example

    Buybacks Destroy Blue Chip Stocks, GE Is A Prime Example

    • GE spent more than $21 billion on buybacks in 2016. The stock price is now down more than 30%, thus that $21 billion was thrown away.
    • Other S&P 500 companies aren’t much better and their time to reckon with financial engineering will come too.
    • The more buybacks a company does, the lower the market cap will be in 5-years, which is something managers don’t want to know.



    Introduction

    In December 2016, I wrote an article titled Is Your Value Being Destroyed? where I discussed how buybacks are destroying long term shareholder value.

    My favorite example from that article was General Electric (NYSE: GE) because it seemed completely illogical to me that a company would sell valuable assets in order to increase buyback activity because this isn’t how you operate a business, this is pure short term financial engineering. More →

  • 04 Aug
    Think The Biggest Companies Of The S&P 500 Will Outperform? History Says Otherwise

    Think The Biggest Companies Of The S&P 500 Will Outperform? History Says Otherwise

    • The strongest companies in the S&P 500 may look invincible now, but history shows us this won’t last forever.
    • None of the companies in the S&P 500’s 1980 top 10 are still there now.
    • Top 10 S&P 500 companies largely underperform the S&P 500 in the long term.

    Introduction

    Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), Amazon (NASDAQ: AMZN), and Johnson & Johnson (NYSE: JNJ) are the 5 largest holdings of the S&P 500 accounting for 11.74% of the index. The other 495 companies account for 88.26% of the S&P 500 which is a pretty strong imbalance, but that’s how the S&P 500 is formed. Its weightings are based on market capitalization. The bigger the market capitalization, the bigger the weighting in the index. More →

  • 29 Jul
    Corporate Earnings of the S&P 500’s Top 10: Why It Is Important for You

    Corporate Earnings of the S&P 500’s Top 10: Why It Is Important for You

    • Corporate earnings and fundamentals are variable, pick the stocks that best suit you.
    • There are low PE ratio stocks, high growth stocks, and high dividend yielders – anything you might want.
    • But be aware: some companies engage in buybacks that are detrimental to shareholders’ value.

    Introduction

    When you add up the top ten companies by weight, they account for 17.7% of the total weight of the S&P 500. For investors who are heavily invested in the S&P 500, following the earnings of its top ten companies is essential in order to understand the risks and rewards of being invested in the index. In this article we are going to assess the current market situation by looking at what has been going on with the 10 biggest companies in the S&P 500 index. More →