In Focus: GE
Updated: Feb 2, 2020
Thanks for checking out this week's In Focus, our look into a company, companies, or markets that made Wall Street's news cycle. This week we bring GE in focus.
That's how much GE's stock price increased in January 2019. The stock has been on an absolute tear, exciting Wall Street professionals and everyday investors.
General Electric's Q4 revenue surpassed analysts estimates by $1 billion dollars. The company closed the year out with $33.3 billion in revenue for the fourth quarter.
This was the amount GE paid to settle the DOJ investigation into its accounting practices.
Transportation, Power, Lighting, Healthcare
These are the areas of General Electric's business that still need attention. The revenue from Transportation decreased 48%, Power revenue decreased 19%, Lighting revenue decreased 16%, and Healthcare revenue decreased by 2% in Q4. It's not all good at GE as these numbers point out.
Who Should Get the Credit?
Larry Culp, GE's current CEO who was given the position in October 2018 has received a ton of praise for what appears to be the start of GE's turnaround. Congrats to Larry Culp and the team at GE for the quarterly win, but I can't help but think John Flannery put a lot of this in motion. Flannery held the CEO position at GE for a little over a year before he was replaced.
The Future of GE
There's still a lot that needs to be figured out with GE, but it appears Larry Culp has a plan. He did mention that 2019 cash flows could be hurt due to restructuring charges and the Power business will continue to face headwinds moving forward. Analysts appear to respect Culp's honesty about the position of the company, and by the run-up in the stock analyst also believe Culp can get GE headed in the right direction.
Our Investment Plan
General Electric has been a value trap for a very long time. We've discussed GE in the past, and there was a time when we were set to accumulate the stock under $9 per share. However when it broke below $10 a share in November 2018, the momentum down was too much for us to get in the way of, so we didn't invest. Now the stock sits above $10 a share, is now the time to get long GE?
$10 per share for GE is a bit high for us. My gut says the January gains will disappear over the next few weeks (too high, too fast), but I don't know how low it will go. The worst thing any value investor can do is try to time the markets. It's best to pick an area or price range that represents value and begin to build a position, I don't think $10 per share is that area of value. GE is a HOLD.
If you were smart enough to buy it in the $6, $7, $8 per share range, that is great, hold on for the ride. My thought is if an investor bought GE at it's current price, the stock will likely see $7 per share before it sees $13 per share. Also, as Larry Culp has pointed out there are still some headwinds for the company. I dont know if I believe the worst is over for GE. I'd be more willing to take a bet on it at $5, but at $10 per share I'll have to watch from the sidelines.
This is where I leave you with a Hold on GE. Thanks again for checking out In Focus, may your next investment be your best investment.