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The bear case for General Electric

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General Electric (GE-N) -- considered a bellwether of the U.S. economy -- beat expectations when it reported third quarter profits on Friday. But Charles Ortel, Managing Director at Newport Value Partners, tells BNN that all is not well under the hood at GE.

"On its finance side it is a troubled, poorly positioned financial business with heavy exposure to Western and Central Europe that has a practice in the past of taking aggressively high marks for its assets and financing itself with too little permanent long-term debt and too much short-term debt," Ortel tells BNN.

"In the recent quarter a lot of the movement up in the finance business was the reduction in loan loss provision taken against its assets. We would strongly question if that makes sense, because we have a structurally bearish view in what's going on -- particularly in Western Europe and U.S. -- in aged advanced economies where GE is very active."

Ortel says the company's stock is not trading in line with many of the problems plaguing its financial unit and growing economic headwinds.

"We think the stock is overvalued and trades on the false theory that they can maintain their dividend in the face of daunting geopolitical and macroeconomic headwinds that are still building," he says. "I would argue it's overvalued by at least $5 a share and there are some reasonable cases that would say it's overvalued by $10 or more per share."

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