Everyone loves payday. Just like everyone else, once I get that sweet deposit in the bank it starts burning a hole in my pocket. Before much time I am ready to blow it all on a shopping spree. My store of choice is the stock market, and I’m shopping for the best deals on companies. Here is what I dropped my $1,000 on this Monday, April 2nd. (Markets were closed last Friday in observance of Good Friday.)
General Electric (GE)
The seventh pick of the Let’s Be Millionaires investment series goes to General Electric (GE).
General Electric (GE)is a household name, and the only original Dow Jones Index component company to still be a part of the index today. Founded 125 years ago, GE is a multinational conglomerate that seems to be in just about everything but has been spinning off a lot of its businesses over the past few years, especially the businesses it owned in the banking sector.
So, how does such a well-established company end up as a hail mary? If you have turned your TV to a finance channel over the past year there is a pretty solid chance that you may have heard a story or two about GE, and they haven’t been pretty. This iconic company has been facing some pretty serious business troubles, and with Wall Street dropping price targets further and further the stock has been in free-fall for over a year now.
Those who believe that GE has a strong future could stand to realize big gains if they time the turnaround correctly, but if GE does not pull it together, investors could be in for even more pain. I’m willing to take the risk with this week’s pick.
About The Stock
Just a year ago GE stock was worth about $30. Today it is worth only $13. The current price levels are the lowest that GE has seen since 2009, the year of the Great Recession. At a time when many companies have been reaching all-time highs, GE stock has been struggling to hold on. Back in the year 2000 GE stock reached an all-time-high of around $60 a share and a multi-decade low of $7 a share back in 2009.
GE stock is at a critical point now and the valuations being given by analysts and pundits are so different that it is really hard to tell wrong from right. There isn’t a catalyst yet to really stop the stocks decline other than the dividend yield and price to book ratio becoming more attractive, and even then GE has been starved for good news. I think that the stock is oversold and could outperform other large conglomerates over the next few years with respect to stock returns.
At its current price GE stock has a dividend yield of 3.56%. This means that I can expect roughly $35 worth of cash payments over the course of one year for holding $1000 worth of the stock.
GE stock can be categorized as a multinational, mega-cap, conglomerate value stock.
GE is in everything, and after 125 years of being in business I just don’t see it going away now. A lot of their product lines and businesses aren’t going anywhere, and for a company this large to see its stock drop 57% in one year without a recession feels a lot like an overreaction. The amount of media coverage and talk alone has probably caused a panic around the stock and the price action definitely has not been positive. Hopefully this $12-$13 range will prove to be a solid base from which the stock can re-build and gain some upward momentum.
Right now, one juicy rumor floating around is that Warren Buffet and his company, Berkshire Hathaway, are in talks around making a significant investment in General Electric (GE). Not only would this boost the stock’s performance in the short term, but I would definitely feel more confident about having bought in at the right time if the “Oracle of Omaha” decides to take a stake.
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1 thought on “2018 Investment Series Post 7”
You make a good case! Any thoughts on your recent pics and the also recent swing in the short-term treasury yields? What are you expecting for your portfolio as a whole in the next couple years?
Also I still think it would be cool to do a section in each new post with a 1 paragraph summary of how your previous investment series posts are doing!
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