In Focus: GE & Tesla
It's been an interesting past few days for General Electric (GE) and Tesla (TSLA). With a review of the news, the additional write-ups, and the stock prices, our investment analysis tells us to AVOID both GE & Tesla as investments.
Following a Legend
For all the hype, accolades, and accomplishments that surrounded Jeff Immelt - GE's CEO from 2001 to 2017 - he really left the company in a terrible position. John Flannery, who was given the job to replace Jeff Immelt, has recently been replaced after only 14 months on the job. A bad team, with bad players, fired its new coach of one year for a losing season, it doesn't seem to make sense.
GE's stock had lost over 50% of its value under Flannery, but he was the guy who had to tell GE investors Santa Clause isn't real. Flannery had to break the news to the public of just how bad GE was. The stock dropped like a rock the day he announced that GE would be cutting it's quarterly dividend in half, and the stock had another dramatic drop in price when Flannery warned that dividend in 2019 wasn't a guarantee. In both of those cases he just delivered the news of a situation that existed before his tenure.
In life and in business people rarely want to hear or know how bad it really is. At times people and businesses hope to do enough good to hide the bad. A bad business and a bad business model can't be the foundation of a turnaround. At this time GE still struggles to control its expenses and carries way to much debt for us to consider this a value investment.
Jim Cramer believes what ultimately hurt John Flannery is that he didn't see charge-offs coming that he should have.
JP Morgan's Steve Tusa's thoughts on GE.
The $80 Million Tweet
With one tweet Tesla lost $40 million; and Elon Musk lost $40 million and his Chairman position at Tesla as a part of the settlement with the SEC. This speaks to something we've seen more and more of in 2018 from Musk, and that is he isn't a grown-up.
Stealing a idea from the sports radio personality Colin Cowherd, when it comes to my quarterbacks and my point guards, I need a grown-up, because that's the person and position running the show. This applies to CEOs of publicly traded companies as well.
The "funding secured" tweet, the back-and-forth name calling with diver Vern Unsworth, and the blow-up on the earnings call at an analyst, are all examples of a genius not acting like a grown-up. The person running a publicly traded $50 billion auto-tech company needs to be an adult.
It appears Tesla is close to turning a profit, and if that happens that will clean the slate for Musk. However, my thought is if he's having these break downs when he's competing against production goals that he set for the company, how will he fair when the competition in the electric luxury vehicle space heats up?
As an investor when you're putting your retirement money or your kids college money into a company, you need the guy running the show to be a grown up, this is your money we're talking about. When the CEO is letting his impulse to respond or make the news get the best of him, that's not someone we would recommend you put your money with.
Things Could Change
An Avoid now doesn't mean avoid forever. GE's new CEO could layout a dynamite plan for a turnaround and Musk could mature. We'll be keeping an eye on GE and Tesla, but for now keeping our investment dollars away from both.
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