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October 13, 2017 Price: $22.98
Market Cap: $199.6 billion
Shareholders of industrial giant General Electric have accelerated their rush for the exits, pushing the shares down 14% since the company’s July 20th earnings release. Not only are GE shares down 27% year-to-date, they now trade at the same $23 price they were at in 1997.
After 16 years of downsizing and asset shuffling, GE now appears to be in disarray, with abrupt changes in the board and at the top levels of management. Fears of a dividend cut, a potentially disappointing (at best) earnings report later this week on October 20 and a possible downward re-set of expectations at the upcoming November 13th analyst meeting provide convincing evidence of disarray and a grim future for GE appears compelling.
We believe, however, that the recent drama is the natural byproduct of the speed and boldness of a new CEO who is determined to toss overboard a failed strategy and improve GE’s operating performance, which should ultimately boost its share performance.
Long ago, the company’s advertising slogan was, “GE, we bring good things to life.” With the new CEO, a better strategy and better execution, we think GE shares could now bring good things to shareholders. For more analysis on GE's value investing appeal, subscribe to The Turnaround Letter.