GE stock has a lot of plusses, and a huge minus

— -- A: If there's been a heartbreaking stock during the financial collapse, it's General Electric.

GE's long history, stellar credit rating, diversified mix of businesses and reputation for solid management has made it a long-time favorite among investors. The company has consistently been the No. 1 stock tracked by readers in their USATODAY.com portfolios, as you can see here.

And examining many of the things investors typically pay attention to, the stock has been attractive. Even using discounted cash flow analysis, which compares a stock's price to the present value of its expected future cash flows, GE's shares have looked attractive as pointed out here.

But as I said in that column, GE stock despite its reputation, is risky. "Investors often make the mistake of thinking that if they own GE they're diversified. GE is massive and has businesses in many sectors, from finance to manufacturing and media. But, owning GE is much riskier than owning a diversified basket of stocks."

For that reason, investors need to remember that if they choose to own GE, it should be part of a larger, more diversified portfolio.

Here's the issue with GE. During times of economic distress, the most important thing to investors are companies' balance sheets. At this point, investors don't care as much about a company's profit as they care about liquidity, cash and debt levels. Many investors have been shocked at how GE's debt has come back to haunt it during the recent downturn.

At this point, credit rating agencies are considering stripping the company's coveted AAA rating. Meanwhile, the stock has been in freefall, losing 82% of its value from its 52-week high. That's a devastating loss for investors.

Is the stock going to rise, or fall further, from here? That depends on who you ask. Robert Maltbie, of research firm Singular Research, says a vast majority of GE's returns in the 2000s was largely a mirage, the product of excessive leverage. The more a company borrows, the better its return on equity, or cash put into the business by stock investors, looks. But when the economy slows, excessive borrowing puts the company at risk. Maltbie expects GE's revenue to fall 5% in 2009 and earnings per share to decline 64%. Maltbie rates the stock a sell.