Logically, the name of a company does not matter to investors at all. It should be all about profit and prospects, but I have never felt the same about Google (GOOG: GOOGL) since they became Alphabet and I have an illogical, but I believe understandable, aversion to names that are changed to hide the identity or industry of the company, like Accenture (ACN) or Altria (MO). Even worse though, is when a company name is unwieldy, and the best recent example of that has to be “Baker Hughes, A GE Company” (BHGE). Any name that attempts to tell a story or includes punctuation is an abomination, and BHGE fails on both fronts. Still, after a drop on disappointing earnings this morning, I am prepared to swallow my pride and buy the stock.
As I have often pointed out, one of the most fundamental things to keep in mind when looking at corporate earnings is that while last quarter’s results are, by definition, history, the stock market is generally a forward discounting mechanism. Prospects usually matter more than past performance and, on that basis, BHGE looks like a bargain.
The usual measure of price relative to expectations is the PE/ Growth, or PEG, ratio. When that ration is below 1.0 it is generally considered an indicator of value, and BHGE’s PEG right now is 0.36. The numbers are therefore encouraging, but like my reasons for disliking the stock in general, my reasons for liking it right now are a little less mathematical.