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GE: Reasons to Sell

Saturday - 12/8/2012, 8:00pm  ET

In this video, analysts Austin Smith and Isaac Pino discuss the reasons to be bearish about General Electric .

Although Isaac is more bullish than bearish on this stock, he points out how the company's financial unit affected the entire company during the 2008 financial crisis and how management wasn't able to foresee the future to mitigate the damage.

In addition, GE faces high pension costs and an aging workforce, as many old, large industrial companies do. Other potential problems include the company's exposure to the defense industry -- not a promising prospect with so much fiscal uncertainty in the air -- and its tax liability with respect to high lobbying expenditures.

Given these challenges, Austin suggests investing in 3M instead, since it's similar to GE in many ways but isn't exposed to the same concerns. 

Even as GE recovers from financial crisis-related issues, there are still other problems that could lead to poor stock performance. However, management did take advantage of the market's dip to make some strategic bets in energy. If you're a GE investor, you need to understand how these bets could drive this company to become the world's infrastructure leader, but you also need to be aware of the continuing threats to GE's portfolio. To help, we offer comprehensive coverage for investors in a premium report on General Electric, in which our industrials analyst breaks down GE's multiple businesses. You'll find reasons to buy or sell GE, and you'll receive continuing updates as major events unfold during the year. To get started, click here now.