General Electric: The Markopolos Report Will Eventually Be A Net Positive

Sep. 05, 2019 12:45 PM ETGeneral Electric Company (GE)64 Comments
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  • General Electric's stock was performing well on a YTD basis before the Markopolos report was released.
  • I believe that the Markopolos report will [eventually] turn out to be a net positive for long-term shareholders.
  • I am long General Electric, and I recently added to my position.
  • This idea was discussed in more depth with members of my private investing community, Going Long With W.G.. Get started today »

General Electric's (NYSE:GE) stock was performing well in 2019 before the Markopolos report was released to the public on August 15, 2019.

ChartData by YCharts

Two things to notice: (1) the significant drop in mid-August after the Markopolos report was published and (2) GE shares are still up almost 16% even after the recent double-digit decline.

I actually believe that the Markopolos report will be a positive development for GE shareholders, eventually that is. Additionally, I believe that shareholders with a long-term mindset should consider staying the course while this story plays out because GE shares still have significant upside potential if the fraud calls turn out to be incorrect (which I believe to be the case).

The Timeline, Is It This Or Is It That?

Not to rehash the already well-covered Markopolos report (see here and here), but, basically, the person that discovered the Bernie Madoff Ponzi scheme, Mr. Harry Markopolos, recently called GE the biggest fraud since Enron and WorldCom (now that is saying something!). The report, in my mind, boiled down to two major points: (1) GE's insurance reserves are not sufficient and (2) the accounting for the Baker Hughes (BHGE) transaction was fraudulent, and the company is "hiding" an almost $10B loss.

Source: General Electric, A Bigger Fraud Than Enron

I could go on-and-on about this report, but, instead, I want to focus on a timeline for how things played out since the fraud call first hit the wire:

August 15, 2019

  • Mr. Larry Culp, CEO, called the fraud allegations "market manipulation" and questioned Mr. Markopolos' compensation related to the release of the report (an unknown hedge fund paid him for his "research"). Mr. Culp also put his money where his mouth was by purchasing 252k shares of GE after the Markopolos report was released (and

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This article was written by

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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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