Here's a contrarian opinion: GE stock is a buy right now.
Financial media outlets have been quick to dismiss General Electric Co. (NYSE:GE) as a total disaster after its recent dividend cut.
"GE Debacle Whacks Major Institutions and Insiders Alike," wrote Forbes yesterday (Nov. 14).
"GE shares are entering a 'death cross,'" warned CNBC.
Some even went as far as to write off GE stock completely.
"GE is broke," wrote CNN Money.
Here's the thing...
They're not telling the whole story.
Money Morning Executive Editor Bill Patalon has been covering GE for over 20 years - and he's not giving up just yet.
In fact, he's seeing a potential profit opportunity for GE stock now - but only if you're willing to look long term.
Hear us out...
Flannery Is a Finance Guy
Recently appointed CEO John Flannery is no stranger to the company. He's been working at GE for more than 30 years.
"He's no Jack Welch, but I believe he knows what he's doing," said Bill. "Flannery is a finance guy - he made the decision to cut the dividend because he absolutely had to."
Analysts are getting tripped up about GE's decision to cuts its dividend in half, but they're missing the bigger picture:
"Flannery made a tough call, but it was the right call," said Bill. "He did it to avoid 'serial cutting.'"
"Serial cutting" is when companies wait too long to slash their dividend and end up disappointing shareholders even more in the long run, making a series of small cuts instead of one large one.
It's like ripping a bandage off - you've got to do it, and it stings, but you only have to do it once if you do it right.
In addition to cutting the dividend, Flannery also made another significant announcement: GE will be simplifying its portfolio.
And he's chosen three of GE's most profitable and market-dominating divisions to focus on...
The Future of GE Is Smart
Flannery is refocusing GE's efforts on "aviation, power, and healthcare."
"This might actually work," said Bill.
"For one, healthcare is a market leader, and GE is huge in that space," he said. Indeed, the medical device industry is projected to grow at an annual rate of 6.6%, according to Statista.
And since GE is a major producer of CT and MR equipment, it stands to benefit from that growth.
Next, "airplane engines continue to be innovative and profitable for the company," said Bill. "In fact, the company recently invested a cool $4.3 billion to build next-gen jet engines - I think that was a smart move."
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Lastly, Flannery's decision to focus more effort on GE's power division is sure to pay off in the long run.
When GE acquired Alstom Energy's power division in 2015, it acquired a hammerlock on the world's power plants.
"Something like one-third of global power generation is now tied to GE," said Bill. "That's something every investor should focus on."
"Do I wish GE would focus more on Predix? Yes," said Bill, referencing GE's revolutionary "Internet of Things" technology. "But I'm hopeful it will continue to use that software to its advantage while also focusing on these three key divisions."
What to Do with GE Stock Now
While market emotions continue to send GE stock lower (and it will go lower, according to Bill), now is the time to do what every other analyst is telling you not to: Buy the stock.
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"Continue to use an 'accumulate strategy' here - throw a couple bucks at GE whenever you get the chance. Look to buy on pullbacks, like what we're seeing right now," said Bill.
Remember that Flannery became CEO of GE on Aug. 1 - just a few months ago. He's still pulling the company out of its tailspin, which might be slow and ugly work.
"It's going to take him several tries to get it right," said Bill. "The stock may go lower from here - probably 15% lower from where it is now."
But if he succeeds, GE stock will be headed skyward.
The key here is to use other investor's fears to your advantage - buy now, when everyone else is too scared. That way, when everyone else jumps back on the bandwagon, you're already in.
"You're not going to make 'fast money' on GE now, that's for sure," said Bill. "But 10 years down the road - you'll be glad you bought in."
No two ways about it: This will be a bumpy ride. Those who are risk-averse might want to stick to Microsoft Corp. (Nasdaq: MSFT) or Amazon.com Inc. (Nasdaq: AMZN), both solid companies that have been trouncing even this bull market.
But be warned: Everyone is already on those bandwagons.
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It's very rare, and fleeting, and Bill sees things lining up perfectly to bring some very sizeable precious metal profits to well-positioned investors.
Click here to check out his research...
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