General Electric: It Ain't Goin' Be Easy

Dec. 14, 2018 4:20 AM ETGeneral Electric Company (GE)36 Comments
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WG Investment Research


  • General Electric needs to show some serious progress in its restructuring efforts, but a real turnaround is not going to be easy.
  • However, I believe that General Electric's management team has levers to pull that should allow them to focus on the top risk factor (i.e., financial leverage).
  • I am long General Electric and I plan to stay long.
  • This idea was discussed in more depth with members of my private investing community, Going Long With W.G.. Start your free trial today »

2018 will be a year that General Electric (NYSE:GE) and its shareholders will want to forget about. The company's stock started the year in the $17 per share range but GE shares are now sitting below $7, which are prices not seen since the Financial Crisis.

ChartGE data by YCharts

This storied company's stock is down big over the last 11 plus months and this is after it finished down by approximately 45% in 2017. I have been asked a lot lately about what I plan to do with my GE shares and my answer has been consistent - i.e., I plan to stay long (and wrong, at least for now). My thoughts on this company/stock have not changed to this day, but it's important to remember, it is not going to be easy for Mr. Larry Culp, CEO, to orchestrate a true turnaround of this hodgepodge of a company. Therefore, investors should obviously still view this once great company as a high risk/high reward investment.

A Turnaround Is Needed ASAP, But It Ain't Goin' Be Easy

GE has had to contend with several major headwinds over the last two-plus years but the company's Power unit has consistently been the main topic of discussion for the bears. The table below puts the operating units' woes into proper context:

Source: Q3 2018 10-Q

It has indeed been that bad for Power. Moreover, the unit's profit margin dropped from the mid-single-digits to slightly above 0% for 2018.

Source: Q3 2018 10-Q

It would be the understatement of the year to say that the operating environment for Power was challenging over the first nine months of 2018. Management has been consistent with painting a picture of the challenges that Power is facing and I believe that investors should expect more of the same through

This article was written by

WG Investment Research profile picture
Our President and CIO is a CPA with experience in public accounting and the financial services industry. He earned his Master of Accountancy degree in 2008 and his B.S. in Business Management in 2007. He is also a Level III CFA candidate. He has been intrigued by the market from the start. Over the years, he has learned that long-term investing is a discipline that, if followed, will help contribute to building lasting wealth. As such, most of our articles will be about the investments that we plan to hold for at least 3 to 5 years, as long as the company's story does not change. As a Seeking Alpha contributor, our main goal is to write about the companies that are key to our portfolio with the hope of promoting discussion (for or against the investment) from others within the SA community.Please visit our website for more information about W.G. Investment Research LLC.

Disclosure: I am/we are long GE, BHGE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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