General Electric Co. (NYSE: GE) stock has fallen 63.53% from a peak of $60.00 on Aug. 28, 2000, to a 52-week low of only $21.88 per share. Not surprisingly, millions of investors are eyeballing it thinking to themselves that it's ripe for a recovery.
Good luck with that.
The stock will have to appreciate 127.06% just to break even.
Dividend investors are at particular risk because the cash flow is so bad that executives may not be able to cover the $8 billion nut legions of retirees are depending on.
That anyone thinks this is a surprise at this stage of the game given the company's history simply boggles my mind.
General Electric is a train wreck of a stock and has been since former CEO Jeffrey Immelt took over from "Neutron" Jack Welch in 2001. At the time, he was viewed as a hero capable of running the legacy he inherited to new heights, but now, 16 years later, Immelt may go down as one of the single worst CEOs of all time.
Plenty of shareholders would agree.
GE's lost a staggering $400 billion worth of its money on his watch. I think it's very telling that GE's stock was worth less on the day he left than on the day he joined the company. And, unfortunately, millions of investors who've gone along for the ride have gotten clobbered.
Adding insult to injury, GE's stock is off a stunning 31.3% this year alone, while the Dow has put in a staggering 54 new record highs over the same time frame.
Now What?
The Internet is filled with stories about why GE's a great buy at around $22 a share:
- "Why Now Is a Good Time to Buy General Electric" – Forbes
- "General Electric: Buy the Dip?" – Motley Fool
- "Why Dividend Growth Investors Should Consider GE" – Seeking Alpha
Don't believe a single one of 'em.
The GE we know today will not exist in 10 years… if at all.
In fact, I think it's highly likely that GE gets dropped from the Dow, which would be the ultimate irony considering that it's the only original listing left from 1896, when the Dow was created. GE is in such bad shape that it's skewing the ratio of the highest- to lowest-priced stocks in the venerable industrial index.
GE's profits have repeatedly fallen short of expectations, cash flow difficulties make a dividend cut very likely on Nov. 13, and poor management execution is de rigueur.
"But," goes the rallying cry, "it's GE!"
So?
It doesn't matter whether we're talking about an American icon or not.
I see very little evidence that GE executives understand how to move the company forward, which means, by implication, that they don't understand the markets within which the company operates. That's hardly a recipe for success… perhaps at the tables in Vegas, but that's a different line of thinking.
The irony, of course, is that Immelt wanted to create a simpler, far more valuable industrial company. Instead, he's leaving behind a ruined shell with no consumer presence to speak of, very little in the way of commercial product viability, and almost no development pipeline.
Wall Street, naturally, doesn't see things that way, which is hardly unexpected. They make their money by keeping you in the game, so publishing a positive spin is par for the course.
Again, don't fall for it; what Wall Street says is very different from what Wall Street does.
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Keith Fitz-Gerald has been the Chief Investment Strategist for the Money Morning team since 2007. He's a seasoned market analyst with decades of experience, and a highly accurate track record. Keith regularly travels the world in search of investment opportunities others don't yet see or understand. In addition to heading The Money Map Report, Keith runs High Velocity Profits, which aims to get in, target gains, and get out clean. In his weekly Total Wealth, Keith has broken down his 30-plus years of success into three parts: Trends, Risk Assessment, and Tactics – meaning the exact techniques for making money. Sign up is free at totalwealthresearch.com.
Mr. Patalon, there was a big fan of "G.E.", I suppose he didn't see this either.
Hi John,
Thank you for your comment and for reading Money Morning. In fact, Bill has been keeping a close eye on GE. You can read his latest insight here: https://moneymorning.com/2017/10/11/ges-biggest-cheerleader-is-getting-worried-heres-why/
– Corina Heich, Editor, Money Morning