A sputtering economy, implosions at financial institutions, or just plain bad management -- on any given day, investors can name a number of reasons to sell a stock. Yet while panic is never beneficial to investors, it's good practice to play devil's advocate with investments from time to time.
In Motley Fool CAPS, more than 120,000 members have weighed in on nearly 5,400 stocks and shared bullish and bearish opinions alike.
In the case of industrial conglomerate General Electric (NYSE: GE ) , a total of 11,258 members have commented on its chances of success. I've already plucked out some of the bullish rationale backing GE today, so here are three counterpoints to consider, courtesy of CAPS:
Financial exposure: GE's finance unit brings in a big chunk of its operating profits. With the unit reporting a 33% drop in income in its recent quarter, some investors fear that things could get worse. Some also question whether it still deserves its AAA credit rating, which it relies heavily on for low-cost funding. Costs to insure GE's debt are much more than other triple-A rated companies, such as Johnson & Johnson (NYSE: JNJ ) or ExxonMobil (NYSE: XOM ) , and even for some lower-rated companies such as Goldman Sachs (NYSE: GS ) .
Inefficient structure: GE's conglomerate structure is bringing in uneven performance across its divisions. In its most recent quarter, the energy group grew while earnings from the consumer and industrial businesses suffered declines. As everyone from Citigroup (NYSE: C ) to JPMorgan Chase (NYSE: JPM ) tries to quickly unload assets, GE is still having no luck getting rid of its $30 billion private-label credit card operation and its rail-car leasing business.
More red flags: Companies such as Bank of America (NYSE: BAC ) have recently slashed their dividends, and for the first time in 32 years, GE suspended its dividend increase. The shares it sold to Warren Buffett cost GE an expensive 10% yield, and the raising of an additional $12 billion in common shares during such a low point in the share price has left more than a few investors squeamish.
Of course, GE has survived and thrived despite dozens of obstacles. But the question about whether the company will continue to do so is why CAPS is such a great resource.