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With the news this week that General Electric Co. (NYSE: GE) CEO Jeff Immelt is stepping down from his post, the company is back under the microscope. The market is still getting comfortable with the plans and abilities of incoming CEO John Flannery, officially slated to begin Aug. 1.
Fortunately for Money Morning readers, Money Morning Executive Editor Bill Patalon is already comfortable with the stock. In fact, he has been bullish on GE stock for years and still is today.
While CEO uncertainty can panic some investors, new CEO John Flannery's record will only help GE. He boasts a 30-year career at the company, heading international offices across the globe. More importantly, he successfully turned the company's $18 billion healthcare division around.
GE stock jumped 3% June 12 after the succession news as Wall Street showed early confidence that Flannery will be able to wake up the company's languishing stock price.
In recent years, shares of GE have stagnated, rising up just 6.8% in the last three years. That sparked investor discontent and even prompted an activist hedge fund to make some noise. Nelson Peltz of Trian Partners took a stake in October 2015. Perhaps that sped up the change of executive leadership at the top...
A Blue-Chip Stock for the Long Term
GE has a long history of making moves. In the 1990s, it went on an acquisition spree, gobbling up many small companies, that barely made a dent in its petty cash hoard. The theory was that one or two were bound to pay off big.
After the financial crisis of 2008, the company's Financial Services division was dinged thanks to the credit default swaps fiasco. Though the company's own finances were damaged, Patalon knew it would bounce back. After all, it had done so time after time before.
Think about this: General Electric is the only remaining original member of the original Dow Jones Industrial Average, the market's benchmark index created more than century ago.
Today, GE is thought of as an industrial stock in rather sedate businesses. It does not make social media apps, so by today's standards it is not a sexy stock.
But Patalon says it is a massively overlooked stock. And overlooked stocks with a story are usually the best investments.
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Why is GE going to make investors big profits? Because of its Predix product, a cloud-based, super Internet software. The company is on a mission to be one of the top 10 software companies in America in just a few years.
And that should be the biggest catalyst for GE stock in the next several years...
