GE-C1 comes with disount of 5.6%

General Electric Company (NYSE:GE) is a mammoth company and can often provide a good gauge for the overall market. That is, when GE goes higher, the overall market often follows suit. GE has been making some recent highs and that bodes well for investors, and may be marking the end of the concerns about loan losses.

Rising Dividend Investing had these comments to add about GE:

"GE has recently broken above a several-month trading range on high volume. GE has many qualities that make it something of a microcosm of the US economy. Thus, its price breakout suggests that worries about its loan losses and perhaps loan losses for financial companies in general might be peaking.

GE has been in the middle of the financial crisis, and for it to power to a new post-crash high is big news. We've watched price graphs long enough to know that some very big money has just made some very big bets that the news for GE is going to get better over the coming months.

Additionally, because GE's business is so multi-faceted, there is reason to believe that good news for GE is probably good news for the whole economy and stocks.

Interestingly, GE had a couple of big days right after their CFO announced that the company was considering a dividend hike in 2011. In this regard, their message is similar to the one we suggested in last week's post about the banks. That is, companies, even companies in the financial services sector, appear to feel comfortable with their current levels of capital reserves. When GE starts talking about dividend hikes, it sends a clear message: they don't have any dilutive equity capital underwritings in the works. That is good news, but even more importantly, if they are talking dividend hikes, it follows that they must see an end to their loan losses. That's even better news."

Currently, there is a GE call warrant (GE-C1) listed on KLSE. In my humble opinion, it is one of the best and most attractive call warrants available in KLSE. The main reason i am saying this is because of its discount. Currently, GE-C1 comes with a discount of 5.6% and gearing 3.9. GE-C1 is trading at RM0.13. To erase all the discount, GE-C1 should move forward 22% (5.6 x 3.9) or RM0.03 (RM0.13 x 22%) to RM0.16. There are still another 2 months before it expires, soon or later the discount has to be realized. Since GE-C1 is a European style call warrant, we cant convert it now, not until its maturity date. GE's recent gain is supported by its fundamental, i think it still has the strength and momentum to move forward further.

GOon