Is GE the Ultimate Comeback Stock of the Decade? Investors Think So!

Stocks

Stock	Price	52 Week Range	Marketcap	EPS	Dividend Yield	Chart (24H)	Sector	Employees	Last Updated
GE Aerospace GE	$171.49		185.60B	5.08	0.67%		Industrials	125,000	1 day ago

General Electric (GE) has orchestrated an impressive turnaround in recent years, emerging from the shadow of its past financial woes to reestablish itself as a powerhouse industrial giant. The story of GE’s transformation is not just about recovery from the 2008 financial crisis, but about strategic pivots and innovative investments that may position the company—and its stock—as a long-term winner.

Remember the dark days of 2008? GE does. The company found itself teetering on the edge of financial ruin largely due to the overleveraged balance sheet of GE Capital. At its peak, GE Capital held $600 billion in assets, exposing the company to enormous risks. The result? A staggering $32 billion loss and the first dividend cut since the Great Depression. Government bailouts and frantic restructuring efforts were the only lifelines back then.

I worked for General Electric from 2006 through early 2009. The company I left was reeling from the credit crunch fallout; GE Capital was an 800-pound gorilla, and its problems cost me and many others not only our jobs but the dividend on our stock holdings as the parent company cut its dividend to save cash.

Fast forward to the present. What a difference a decade-plus makes! GE Capital has shrunk its assets by a third, retreating from riskier ventures and recalibrating its focus on mid-level lending. Current CEO Jeffrey Immelt aims to further slim down GE Capital’s assets to between $300 billion and $400 billion. This overhaul has not only stabilized GE but also set the stage for future growth.

Jeffrey Immelt’s vision for GE‘s future is laser-focused and aligns with the trends that matter. The goal now is to generate 70% of profits from its industrial operations, up from the current 54%. And it is evident in the sectors where GE is placing its bets.

Editor's Note: Analysis and insight for this article were originally sourced from our friends at InvestorPlace 

GE Aerospace

GE

$171.49

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The shale gas sector is sizzling with potential, and GE is right in the thick of it. The company has poured billions into the requisite technology to support shale extraction, highlighted by the acquisition of Lufkin Industries. Lufkin is a key supplier of artificial lift products and pumps, crucial for efficient shale extraction. With this acquisition, GE aims to cement its role as an essential player in the booming shale industry without directly engaging in drilling activities.

Adding to the bullish sentiment, analysts have expressed overwhelming confidence in GE‘s trajectory:

In a strategic about-face from the trend of outsourcing, GE is ramping up its insourcing efforts. A prime example is the relaunch of water heater production at its Appliance Park facility in Kentucky. This reshoring move not only taps into the growing sentiment for “Made in the USA” but also signifies a robust, advanced manufacturing strategy that’s poised to reap rewards.

Green tech isn’t just a buzzword for GE; it’s a core component of its future. Under their Ecomagination initiative, GE is heavily investing in renewable energy technologies, including solar panels, wind turbines, and energy-efficient solutions for various industries. This ensures GE is not just riding the green wave but is at the forefront, shaping the future of sustainable energy.

Immelt’s goal is to get his company to generate 70% of its profits from the industrial side, a marked increase from its current 54%. To achieve this, GE has embarked on specific initiatives:

• Shale Gas: Immelt is determined for GE’s Oil and Gas division to take a leadership role in shale extraction or fracking. The decision to purchase Lufkin, a supplier of lift products and pumps for the oil and gas industry, exemplifies this goal. GE aims to become a major player in the technology that facilitates shale extraction, rather than directly engaging in drilling.
• Advanced Manufacturing: Moving toward insourcing, GE is reinvigorating its manufacturing capabilities. For example, after years of outsourcing, GE has resumed water heater production at its Appliance Park facility in Kentucky. This marks a significant shift and leverages the growing appeal of “Made in the USA.”
• Green Initiatives: Perhaps one of Immelt’s most visionary moves is the focus on Ecomagination, spanning from solar panels and wind turbines to technology solutions aimed at reducing fuel usage in trucking and aviation. GE‘s commitment to green technologies positions it ahead of many competitors in the sustainable energy sector.

GE‘s strategic focus and restructuring are a masterclass in turning adversity into opportunity. Under Immelt’s leadership, GE has effectively shed non-core businesses and homed in on sectors with high growth potential. The shift towards industrial innovation and sustainability not only promises robust returns but also positions GE as a leader in industries with long-term growth trajectories.

Moreover, the reinstatement and gradual increase of dividends are clear indicators of GE‘s financial health and a firm commitment to rewarding shareholders. For investors hungry for stability coupled with substantial growth potential, GE offers a compelling story.

A dividend that was cut to 10 cents a quarter in 2009 is now a very nice 19 cents, hopefully back on the way toward the 31 cents share it was before the divvy cut (and appreciably higher over the next 10 years). Immelt is keeping a floor under the equity by buying back shares, bolstering shareholder’s confidence in the company’s growth trajectory.

Analysts are broadly positive about General Electric (GE), with most forecasting significant price increases. The consensus is in favor of strong buy or buy ratings, indicating a good investment opportunity.

Long-term Restructuring: GE has significantly downsized its risky financial segment (GE Capital), realigning its focus on industrial operations.

Dividend Reinstatement: The return and planned increase of dividends signal financial robustness and commitment to shareholder returns.

Future Growth: Strategic investments in shale gas technology, reshoring manufacturing, and green initiatives forecast robust future performance.

GE‘s remarkable recovery underscores its resilience and innovative capacity, making it a stock that savvy investors should keep on their radar. With a balanced focus on industrial innovation and sustainability, GE is not just overcoming its past challenges but is actively shaping a prosperous future for its investors.

This article should provide a comprehensive view of GE’s transformation and lay out the case for why it represents an exciting long-term investment opportunity. It speaks directly to the drive and savvy of our audience, emphasizing actionable insights and the strategic maneuvers that make GE a stock to watch.

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