So far this summer, I have been asked by at least three individual investors what do with their General Electric (GE) stock. Often, they inherited the stock from a relative. My response is always the same: 1) it might have a dead cat bounce in it, 2) the institutional holdings in GE is so large that there is a huge overhang to the stock making any significant upside virtually impossible, 3) the dividend won’t protect you, 4) don’t hold it for emotional / nostalgic reasons, 5) what worked twenty or thirty or fifty years ago or more for GE won’t work in the future and, 6) there are better places to put your money.
GE is a quintessential zombie stock. It is one of the walking dead companies in the stock market. Trust me that there are others out there. Try on for size: Pier One (PIR), Nokia (NOK) and BlackBerry (BB). The graveyard of Wall Street is littered with other stock Zombies – Radio Shack (once Tandy) and Sharper Image, to name of few.
Recall that I was accumulating shares of IAC/InterActive Corp earlier this year. Also recall that after the stock sold off hard on news that Facebook (FB) would launch a competitor dating service, I added to positions in IAC. Well my patience and discipline paid off last week when IAC jumped 26% thanks to its own earnings and that of Match Group (MTCH). IAC holds a large piece of ownership in MTCH. In the middle of last week, I even added more IAC stock.
I was also asked by several people as to my opinion of Tesla (TSLA) and its chairman Elon Musk. Last week Musk caused a brouhaha when he mentioned on Twitter (TWTR) “Am considering taking Tesla private at $420. Funding secured.” The stock then rose dramatically as the comment forced short sellers, in the highly shorted stock, to cover their positions. I think that Musk is an engineering genius. However, he is a train wreck of a corporate CEO. I think that similarity, Mark Zuckerberg is an excellent computer programmer but a lousy CEO. Also remember that I prefer to side with IAC’s CEO Barry Diller rather than Zuckerberg. I think that raising financing to take TSLA private is a long shot. Also, Musk is likely in some hot water with the SEC (Securities & Exchange Commission) for his recent tweet. TSLA is not a Zombie stock but it certainly seems possessed by some kind of demon.
These next two weeks are the most active vacation weeks of the year. I will be spending my time up at Lake George and Saratoga Springs / Race Course, but as always will be keeping an eye on the markets and our positions. Aren’t mobile telecommunications great! I thought that it would be a good opportunity for readers of “My Gut Feeling” to send me some questions the next week to two and I will then post the Q&A in a future “My Gut Feeling” later this month.
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long IAC, — although positions can change at any time.
Scott Rothbort is the President & Founder of LakeView Asset Management, LLC, a registered investment advisor specializing in high net worth private wealth management. For more information on investing with LakeView Asset Management, LLC call us at 888-9LAKEVIEW or request more information by clicking on the contact button on the top right hand corner of the website. LakeView Management, LLC is a Nevada LLC, with its principal office located in Henderson, NV and branch office located in Millburn, NJ
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