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VIDEOTicker Shock: GE's High-Voltage Future
Monday's top stories and stocks with potential to move.
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Asian stocks closed lower. The Hang Seng was off more than 4%, while the Nikkei was off more than 1%. Meanwhile, European stocks were slightly lower earlier this morning. And here in the US we're currently trading (geez) lower.
Here's what I’m focused on this morning:
General Electric (GE):
I’ve been doing a lot of thinking about the company that “brings good things to life,” and the beating its shares have taken. There’s just been so much trash-talk and hand-wringing over GE Capital. However, I’m taking a glass-half-full view on this one. Here are some tidbits you might find interesting:
1. A quick gander at its 10K indicates that, as of December 31, GE sported roughly $48.2 billion in cash and equivalents on its balance sheet. That was about $4.56 a share, by my math. (Remember, the stock trades at about $7.)
2. Take a gander at the recent insider activity. Data on Yahoo Finance indicates a flurry of buying.
3. It trades at just 5.6 times the current year estimate of $1.26.
You’re not hearing about any of that in the news, are you? Why?
Folks, my bet is that everybody out there should do some hamstring stretches, because we’ll be kicking ourselves a year or 2 from now, wondering why the heck we didn’t belly up to the bar on this stock.
Merck (MRK):
Some great news out, regarding the big-name drug company. Merck and Schering are going to combine forces. Per the release:
“Under the terms of the agreement, Schering-Plough shareholders will receive 0.5767 shares and $10.50 in cash for each share of Schering-Plough. Each Merck share will automatically become a share of the combined company. Merck Chairman, President and Chief Executive Officer Richard T. Clark will lead the combined company.”
My feel is that this totally makes sense for both companies. Schering seems like its been trying to get to that next level, and combining forces with a powerhouse like Merck should help it get there. Meanwhile, Merck has been stuck in a rut for some time. It needed a catalyst to make things exciting again, and get analysts and investors talking about the company like we once did. I think this should do it.
Incidentally, for those wondering about cost savings, check out the following in the release:
“Merck expects to achieve substantial cost savings of approximately $3.5 billion annually beyond 2011. These cost savings are expected to come from all areas across the combined company and from the full integration of the Merck/Schering-Plough Pharmaceuticals cholesterol joint venture. These cost savings are in addition to the previously announced ongoing cost reduction initiatives at both companies.”
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