Today's 3 Stock Picks: GE, C, AMZN

General Electric (GE) shares dropped Thursday as the company refuted published reports that it was seeking a major investment from a sovereign wealth fund, a stake purchase that investors feared would dilute their own holdings.

A spokesman for the Fairfield, Conn., industrial, entertainment and financial conglomerate said Thursday that while GE is working on projects that could involve foreign investments, it's not talking about selling a stake in the company. Russell Wilkerson said no negotiations were taking place with sovereign wealth funds or other global investment funds about capital investments in GE.

Published reports claimed GE was in talks with China Investment Corp., Government of Singapore Investment Corp. and at least two other sovereign wealth funds. Although GE last week announced it had enough money to pay out its $1.24 annual dividend, its finance division's woes and vulnerability have added elements of volatility to the stock, which has lost 61% this year.

GE made a little less than half its profits from its financial-services business, though projections say that will drop to 40% next year, despite a major reorganization of GE Capital. That business makes it eligible for the Trouble Asset Relief Program, or TARP, the $700 billion government bailout fund. GE has qualified for TARP, but Morningstar analyst Daniel Holland says the company hasn't availed itself of that money.

He says sovereign wealth funds, like any investor, can buy shares on the open market, which isn't the same as a capital investment that would lessen the value of existing shares.

"When you have a friendly party holding on to your shares and not looking to flip your stock, it's helpful," he says. "That's completely different from doing a dilutive deal."

But the apparent misunderstanding underscores GE's vulnerability in this crisis.

"GE is pretty volatile right now, and you're normally talking about a company that's pretty stable and solid and even boring," Holland says. "It's now probably one of the most volatile stocks on my list."

The Bottom Line: Buy
The volatility is "incredibly weighted to the financial side of the company," says Holland, but long-term investors could see this as a bargain if they can handle the roller-coaster ride that will surely go on a while longer.

Shares of Citigroup (C) continued to plunge Thursday on worries about whether the bank has enough capital to stave off damage from continuing loan losses, even as Saudi Arabian investor Prince Alwaleed bin Talal bin Abdulaziz Al Saud said he'll boost his stake to 5% of the company.

The Saudi prince called Citi's shares "dramatically undervalued" and announced he was increasing his holdings from slightly less than 4%.

Citi's had a brutal week, starting with news of massive layoffs, followed by a 23% stock plunge Wednesday after it assumed another $17 billion in assets from structured investment vehicles, many of which are loaded with bad loans that were previously off the banking giant's balance sheet.

The basic question for investors is whether they think the bank will recover despite the body blows. Ladenburg Thalmann analyst Richard Bove, a leading bank analyst, wrote Tuesday that he thinks this will be the case.

"I am on record as believing that this company is one of the most, if not the most, attractive in the banking industry,” he wrote.

But he says the prospect of further loan losses has prompted investors to stop looking at fundamentals and focus on events. That, he wrote, is a mistake.

"It is too big to fail and there is no indication, given its cash flows and capital, that it is close to failing," Bove wrote. "If the company is going to be around, it will survive because the products and services that it sells are required by the marketplace. In many cases given the breadth of its operations both product-wise and geographically, no other banks can provide these services."

Bottom Line: Buy
These shares are cheap. That doesn't mean they've hit bottom or won't have more ups and downs, but logic should trump sentiment and patience should trump reactiveness.

Shares of Amazon.com (AMZN) rebounded Thursday after reaching a 52-week low on gloomy retail forecasts and a bleak outlook for online shopping.

Data tracking firm comScore on Monday said October e-commerce data were up only 1.3% from the previous year, excluding travel-related purchases. Thomas Weisel Partners analyst Matt Nemer wrote Tuesday that projections for fourth-quarter sales growth for Amazon now stood at 9%, well below his earlier 15.4% estimate. He lowered his price target for the fourth quarter and full year.

It's an awful environment for retailers, and bricks-and-mortar stores are fighting for survival in ways that may be taking a bite out of their online rivals, says Hamed Korhsand of BWS Securities.

"When you order something online, you use a credit card, and how much space do consumers have on them now?" he said. "How willing are they to use them, as opposed to going to stores and getting early discounts?"

Macy's (M), for example, held a one-day sale Wednesday and has been discounting heavily as part of its 150th anniversary celebration.

Richard Hastings, chief consumer strategist at Global Hunter Securities, wrote last week that retail sales will decline by 6% to 8% from last year, worse than earlier estimates. In his Nov. 13 report, he cited the collapse of home equity as a source of collateral and capital to consumers; soaring energy prices; reduced inventory of new merchandise; and accelerated job losses in the holiday quarter.

"Amazon was really one of the darlings of the rally last year, and now investors are not paying the premium," Khorsand says. "This really is a dead-cat bounce."

Bottom Line: Hold
This could offer an opportunity to recoup a fraction of losses, and there's little good news on the horizon. But Amazon is still a market leader and these are not normal times, so waiting may be the best move of all.