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Bottom Calls: Lehman Brothers and General Electric

Lehman Brothers Holdings Inc. (LEH) volatility continues following yesterday’s 11% drop with the stock now reversing and up about 4.69% in early morning trading to $20.74. Lehman notably closed below its March intra-day low of $20.25, but you have to take into account that the weak price action occurred at the end of the second quarter as window dressing and swapping out of financial stocks hit a peak, and on what seems to have been a false rumor of a sale of the investment bank at a steep discount to the current share price, conveniently floated around on the last day of the quarter. Analysts Patrick Pinschmidt and Avi Gho over at Morgan Stanley try to pin the low, with an initiation of Lehman with an “overweight” rating, sticking out their necks to make a pretty solid bottom call.

General Electric Inc. (GE) is seeking a bottom, fresh off a 52-week low of $26.15. Merrill Lynch is boldly out this morning reiterating a “buy” rating on the conglomerate with a target price of $37.50. The bottom line (no pun intended) appears to be that the company won’t miss earnings estimates again and you have to believe that is true. The consensus among analysts is that Immelt won’t make the same mistake twice. Trading at a bargain PE and with a decent dividend yield, this is another timely bottom call. The second quarter report is due out next Friday, July 11.

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