馃寑 GENERAL ELECTRIC: TRADING 馃寑
General Electric Company operates as a high-tech industrial company in Europe, China, Asia, the Americas, the Middle East, and Africa. It offers gas and steam turbines, full balance of plant, upgrade, and service solutions, as well as data-leveraging software for power generation, industrial, government, and other customers. The company also provides various solutions for its customers through combining onshore and offshore wind, blade manufacturing, grid solutions, hydro, storage, hybrid renewables, and digital services offerings.
Insights:
- P/S ratio near to 3, where 2 has been its mean
- Price to Book higher than at any other time
- Correlation with SP500 [SPY] of ≈ 53.87%, where their behaviour only could be explained by ≈ 29% in the last year [LTM]
- Beta with SP500 [SPY] of ≈ 0.86
Based on its last EPS [10/03/24 TTM] of ≈ $8.44 USD and a 18 Forward PER and a sensibility of ± 0.187x annual, a hypothetical spread could be (ceteris paribus):
- High: ≈ $ 180.4 USD
- Neutral: ≈ $ 151.9 USD
- Down: ≈ $ 123.4 USD
Hypothesis
GE in the next 6 months (perhaps 12), might have a distribution phase above ≈ $180 USD and an accumulation phase below ≈ $123 USD where there is a negative bias due to its revaluation probabilities and other quantitative parameters.
Hedge plan example:
- Call [sell]: $172.5 USD
- Call [sell]: 5160 USD
- Put [buy]: $115 USD
- Put [sell]: $95 USD
Risks
- Prices higher than $160 / $172.5 for a long time
- Prices lower than $95 for a long time.
- The neutral price of $133 is not reached at expiration
- Roll over costs (if time is not well estimated)
The best analysis is yours!
J. Joel Padilla
Copyright: Joel Padilla 2024
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