Entering text into the input field will update the search result below

General Electric: Losers Stay Losing


  • General Electric was a bad investment over the last couple of years, and ran into operational problems through 2019.
  • In 2020, things got even worse, due to the impact the coronavirus pandemic has on GE's businesses.
  • Shares have lagged both the broad market and its peers, and rightfully so.
  • If management can successfully turn this ship around, shares could recover a lot of ground. But we believe that it is more prudent to go with higher-quality choices in the industry instead.
  • This idea was discussed in more depth with members of my private investing community, Cash Flow Kingdom. Get started today »

Article Thesis

General Electric (NYSE:GE), which has had more than its fair share of problems during the last couple of years, has run into a range of additional problems caused by the coronavirus pandemic. This includes, but is not limited to, headwinds for its aircraft engine business, which normally is the company's crown jewel.

Shares are not trading at an expensive valuation relative to the revenues that the company generates, but due to General Electric's myriad of problems, going with other industrial names may be the better choice for investors.

Bear and bull, bearish and bullish, bear General Eletric Source: Seeking Alpha's image bank

Core Peer Siemens Was The Better Choice

A couple of months ago, we wrote an article detailing why we believed that Siemens (OTCPK:SIEGY) (OTCPK:SMAWF) was a better pick compared to General Electric. This article was centered around factors such as a stronger balance sheet for Siemens, a more attractive product lineup with more exposure towards higher-growth markets such as Industry 4.0, and a more efficient way of operating the company. Since then, the performance of Siemens and General Electric has been quite different:

Since then, Siemens' shares are down 13%, virtually on par with the Dow Jones Index (DJI) (DIA), while General Electric has generated a total return of -43% in the same time frame. This was not based on a weaker performance during the midst of the market sell-off, where Siemens and GE had dropped more or less the same. Instead, the market's cognition that Siemens was much better positioned to weather the current crisis has allowed Siemens' shares to recover most of the losses during April and May.

Siemens is not the only peer we can compare General Electric to, the following chart could be quite illustrative, especially regarding items such as ROIC or interest coverage:

Source: StockRover.com

Note: Margin

Is This an Income Stream Which Induces Fear?

Data verified by Etrade.

The primary goal of the Cash Flow Kingdom Income Portfolio is to produce an overall yield in the 7-10% range. We accomplish this by combining several different income streams to form an attractive, steady portfolio payout. The portfolio's price can fluctuate, the income stream not so much.

By focusing on underlying corporate cash flows, and management capital allocation and alignment, then overlaying sound money management strategy, we help reduce portfolio income volatility. Capture an income stream that helps you stay logical when times are tough. Start your free two-week trial today!

This article was written by

Jonathan Weber profile picture

Jonathan Weber holds an engineering degree and has been active in the stock market and as a freelance analyst for many years. He has been sharing his research on Seeking Alpha since 2014. Jonathan’s primary focus is on value and income stocks but he covers growth occasionally.

He is a contributing author for the investing group Learn more.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (116)

By the way Hangloose by your last comment I know you didn’t read my post. I clearly stated my break even price is 4.5 dollars per share.on GE. Also you should admit that you didn’t have anywhere in your comments a black swan event as the reason for the stock getting to 5. You are not the only one who commented on GE difficulties prior to the coronavirus. ,if you check my difference of opinion with Mike Slattery in SA comments going back to 2015, you will find my criticisms of Immelt’s deciisios there. Further, you will find that the choice of Flattery met with a lot of skepticism.on my part. The mismanagement of the company was palpable. I don’t recall your comments that early. I already have said I should have sold long before GE got in the difficulty it had previously, but I didn’t. It doesn’t mean that in general I am not good on most of my investments and am really not negative on my GE holdings
Philbert, you do the same thing that many do these days. When someone makes a statement that is correct that you don’t like, you raise a whole bunch of other points that may or may not be factual but won’t acknowledge the accuracy of the original statement. Fact is that
Hangloose’s prediction of 5/ share was not predicated on a black swan event happening. That was my original point. Now so much of your ranting is beside my point, You are incorrect, in that the Chinese have stolen GE’s large engine design. You have a point that GE has a joint venture in China to build older smaller engines. If you check my comments in the past you will find that I was very negative about that joint venture, for the very reason that China would eventually try to steal the technology and announced a big investment of people and money to create a large jet engine domestic industry. I also was negative in SA comments about selling their transportation. and large appliance businesses, GE is no longer a big diversified company. They are completely out of the consumer product businesses after selling their lighting business. I believe now and in the past that that set of decisions were a mistake and initiated by Immelt and continued by his successors. I believe Culp has done so almost out of necessity. By the way the large appliance business was sold to a Chinese company who negotiated the retention of the GE logo. Most people I know believe it is still a GE company and buy those products because they believe it is GE. Service people I have had come in to service problems with the Samsung appliances we now have, , told us we wouldn’t have this problem if it was a GE appliance. Too bad, Immelt and his merry men didn’t have that understanding of the brand reputation and find a way to keep the business.
Philbert , , what is your point? Do you know of any other time in history where the government shut down the economy on a knife edge in a matter of two weeks. This while having a roaring economy with record low unemployment and the prospects of much more equitable trade deals. Air travel was booming and went from over 90% of capacity occupancy to less than 10% in the blinking of an eye. Are you asserting that you saw it coming or that it should have been predicted and accommodated with no impact on one’s primary business if it is making and servicing aircraft engines? If you are pointing out that the state of GE was that they had no mountain of cash on the balance sheet to rely on, that is not a basis for predicting the economic carnage of the pandemic. Of course if it were possible to export the manufacture of aucraft engines to China they might have more cash in the bank. Not as much as Apple but more than they had prior to the crash. Again my point was and I will restate it, the stock would not have recently approached 5/ share if the pandemic didn’t occur and that possibility was not predicted in Hangloose’s reasoning..
@Old Wizard

"Do you know of any other time in history where the government shut down the economy on a knife edge in a matter of two weeks."

Not only that, I know of no other time in history where it was required that the HEALTHY be quarantined. Nothing suspicious about that, at all. Here in our town, the stench is unbearable with all the piles of bodies strewn around the streets.

"This while having a roaring economy with record low unemployment and the prospects of much more equitable trade deals."

Roaring Economy? Record Low Unemployment? Yeah, people supporting themselves on 2 or 3 part time service jobs is a roaring economy alright. I suggest you start taking a look at http://www.shadowstats.com/ .

"Air travel was booming and went from over 90% of capacity occupancy to less than 10% in the blinking of an eye."

GE sold itself as a diversified conglomerate, well positioned & hedged to weather the storms of the business cycle. That was before they started selling all of their profitable shit to pay for the bad bets at Capital. Perhaps if it had been a well run company, Aviation wouldn't have been their only saving grace.

"Of course if it were possible to export the manufacture of aucraft engines to China they might have more cash in the bank."

Why would China want to buy engines from GE? The Chinese H1Bs working at Aviation already stole the design tech years ago . . . love that diversity.

"Again my point was and I will restate it, the stock would not have recently approached 5/ share if the pandemic didn’t occur and that possibility was not predicted in Hangloose’s reasoning"

But the Scamdemic did happen, and they have happened throughout history. It's called a Black Swan, and poor little 120+ year old GE has nothing to fall back upon, other than The Fed buying its junk bonds with our looted taxpayer money.
As usual, you don't bother to read my posts back at you Wizard. I suggest you read it again, as I don't feel like going through it all again.

GE was in trouble long before COVID, and if GE was doing so great, your buddy Culp wouldn't be hawking off what he can to save GE.

Feel free to turn a blind eye and make believe GE was fine well before COVID. No problem for me, as I don't own the stock. You bought it much higher like you and some of your long pals, and will have to cross your fingers to get back in the green someday.

Jonathan Weber profile picture
@hangloose Hawaii

I agree, troubles began before COVID
You are deflecting my point. . Had it not been for the Coronavirus pandemic GE would not had seen five and change recently. Nobody is contesting that GE has had many problems, but they were being corrected by Culp. Whether the stock was ever going to get to the thirties again was arguable.
Now you have no idea what my investment holdings are, I guess you might be critical of my Regeneron, Apple, Facebook dollar tree and Home Depot stock as well. Or the nucor stock I bought in the over forty years ago that i’ve held too long. Might you assume too much before your conclusions about others and their investments. My holding of GE at break even of about 4.5/ share probably is ascribable to the loyalty I had as an employee of over 30 years and it would have been much better to have sold it before Immelt ruined the company, but I didn’t. That still diesn’t bear on your recent ability to predict the share price. GE stock is iirrevocably tied to Boeing’s future and that is tied to commercial airline futures. That is reality and all other factors are secondary.
@Old Wizard

"Had it not been for the Coronavirus pandemic GE would not had seen five and change recently."

Your point being, that in GE's 120+ year history with the best and brightest, they'd never seen a 'Swan of Color', and neither knew how to plan for its coming, nor knew the proper load to bring it down?

That being the case, they don't actually seem that smart.

. . . or maybe it's just cuz' they can't rollover $500 billion in the paper market any longer, eh?
Hangloose, be honest. You didn’t predict the pandemic and you must realize that had it not occurred, GE would not have gone to the 5 dollar and change number. The current price of the stock reflects the big drop out of commercial air travel and the sudden reduction of demand for new planes and maintenance. In mathematics we would represent both of those as a Dirac function. In layman’s terms a big change in amplitude at an infinitesimal change in time. The issue now for GE is can they contend with the sudden decrease in demand for the segment of their business that was the biggest and most cash positive.until air travel restores to pre pandemic levels. Pension and LTC issues are secondary. In a maudlin sort a way the absolutely abhorrent treatment of older people in long term care facilities by most of the nation’s governors has probably reduced GE’s potential shortfalls in these areas.
@Old Wizard

"Pension and LTC issues are secondary," [since they never really intend to honor those commitments anyway.]

C'mon Old Wizard, I have been honest. GE for the past 4 years have been a total cluster****. Dividend slashes, new CEO's, accounting resets and fines, huge DEBT issue to overcome, hawking assets and taking losses on those sales, pink slipping thousands, pension problems that are ongoing, the list just goes on.

The stock over 4 years has gone from $30 to $5.48. All during a hyped bull market. GE has been in trouble long before COVID. Am I lying Wizard??

Now longs like you need to be honest with yourself. Your the one hanging onto hope and a prayer. Time to get honest with yourself, and realize there are far better stocks in the industrial side to invest in.

The globe has been in a recession long before COVID, and now it has reached the USA. So many companies piling on DEBT to try to get through the pandemic and recession. Sure it's "cheaper" DEBT, but still DEBT that will have to be repaid. Companies like GE that will have far less revenues especially in a recession will have even tougher times moving forward.

Eventually P/E's will matter, and newbies that are betting on the hype that GE should be "valued" in a P/E range of 70 will learn the hard lesson of playing with fire.

Don't get mad at my posts Wizard that I can see that GE isn't even worth a $2 stock.

C ya @$5, then watch out below

Well let's see if SA allows my post.

The author spells out the issues GE faces, but omits LTC and whopper pension problems for GE as well.

I see so many newbies here chiming in about buying at such and such prices, thinking GE is going to double or triple bag for them. Obviously they are buying on hope and hype, and will take it on the chin by being so rah rah.

GE has been a house of cards and will continue in a global recession. My 5 buck call was way before Tusa's, and it reached $5.48 for a low so far. IMO, GE doesn't warrant a $2 price for supposedly 11 cents in earnings for 2020. That would give GE a P/E of 18.18, which is still real pricey for a industrial barely able to pay a 4 cent divvy in a global recession.

So, you newbies set up stop loss sell orders yet? With todays market action, plus second quarter report card days, you can expect a lot more carnage in this overhyped market/casino.

The author explains the pitfalls very well in taking a spin with GE. GE has turned into a boiler room play, and Culp and the few longs here that have been cheerleaders on this board, need all the fresh meat they can get to buy into the GE fantasy.

No doubt, you can expect to see Culp being forced to hawk another jewel, and this GE will continue to shrink and pink slip even more employees. Sad to see, but that's what happens when you have a BOD dishing out Millions to make CEO's and top management richer. The buybacks were a total scam on shareholders and employees and greed has run amok in GE for years. Prime example is promising to dish out up to $300 Million to a CEO to just raise the stock up. What a total slap in the face to GE lifer employees that are getting pink slipped, and their pensions frozen.

If you want to "invest" in a greedy GE, then have at it. No way will I support such greed.

I am not even going into detail about the fudge's of GE accounting, which is another total ball of financial wax.

Moral of my post, is follow the authors advice and invest in well run profitable companies that can pay decent dividends or chase greedy management with false Hope's and dreams of double or triple bagging on junk.

C ya @$5, then $2

Jonathan Weber profile picture
@hangloose Hawaii

Yes, LTC and pension liabilities are additional issues for GE
If GE starts a stock repurchase program in the foreseeable future, it will convince me to sell the stock. Immelt’s decision to commit 40B or more to that action in 2015,16,17 was among the worst of many bad decisions he made that put the company in jeopardy. If there is spare cash in the coffers , there are other more productive uses to which it should be employed.. I generally don’t favor stock buy backs unless a company has so much cash on the balance sheet that it has exhausted all other productive uses of the cash. Even in these cases, I favor giving the money to stockholders in extra dividends.
Jonathan Weber profile picture
@Old Wizard

Yes, indeed very bad use of capital. They will not have enough FCF to seriously do any buybacks
I think they can increase dividend to .10 to 12 cents in the 4th quarter and start a share repurchase program.
Jonathan Weber profile picture
@Apple Eye

Why would they? They won't have positive FCF this year
I’m even on GE now. I dollar cost averaged when it hit 6. Poorly run company but if jet engine business picks up this does have a lot of potential upside. Definitely one of my dogs
Jonathan Weber profile picture

Glad you were able to balance out the losses!
I did too (with a big chunk at $5.50) but now thinking seriously about moving on... that capitol can be used elsewhere. I hated the idea of selling at a loss, but now that I'm close to even it will be a lot easier.
@YooogeDisgrace - biggest cost of GE over the last few years is the opportunity cost. Lots of good stocks were paying real dividends and appreciating nicely. Sitting in the same dog for years costs you money!
GE is a cash incinerator. It’s selling cash generating businesses to fund various liabilities. With every business sale, it’s shrinking. Many of the businesses sold, the buyers get the assets and GE retains the liabilities.

"Many of the businesses sold, the buyers get the assets and GE retains the liabilities."

GE Motto: We lose money on every sale, but we make it up in volume!
Jonathan Weber profile picture

Agree, one of the issues here. They have to liquidate strong assets.
I am around 9. I wonder if I should cut my loses. I did not have the conviction to average down on this GE mess. Not sure what to do. May aviation will revamp itself soon.
mk1992 profile picture
$5.50 to $8 in less than a week, glad I didn't listen to you huh?
Jonathan Weber profile picture

More like up 1.4% on the one day since the article was released, while broad markets had twice the gain.
Sighcopath profile picture

"$5.50 to $8 in less than a week, glad I didn't listen to you huh?"

Just keep your hands in the car at all times, the next one is a doozy.
What about GE EE's who get .50 on the dollar to buy GE stock with no commission in the 401K RSP ( along with a full pension including Med benefits in certain cases) and get dividends now if they want them?
What should they do? I'll tell you what.....cry all the way to the bank!
Jonathan Weber profile picture

This was from the perspective of an average investor without these benefits
Contrary to the doom sayers, airline traffic will increase much faster than most think. The GE engine business is key to its stock performance, and as you have indicated, the lion’s share of profit in that business is made in servicevand maintenance. GE’s logistic and real time system that supports this end of the business is the best in the world, Look to a faster recovery there which has no doubt been drastically affected by the pandemic on air travel. In the meantime, the B52 reengining government procurement could fill in the near term, should GE be successful in the competition.
The number of retirees (GE and otherwise) and workers overall---conservative estimate is its in the 7 figures in terms of number of people---that have been and were decimated in their portfolios over the past 15 years, especially with the Street telling this group to "not worry" and to "keep buying more GE because, well, it is GE for crying out loud!.." almost bordered on the criminal. What Jonathan hits the nail on the head here in his article is with these three words: ".... lacking the backlog..." That sums up everything about GE at the moment, for when you dig thru their recent filings, you cannot help but be struck by this. Almost any reasonably well-run industrial/manufacturer is a better play until that simple fact (lacking the backlog) can make the turn. Culp is trying mightily, but this ship started sinking, and it all began with Welch and financial shenanigans he began pulling with GE in the mid-to-late 90s. But when the backlog turns, and in whatever form GE is still in (most likely further broken apart), that will be the time to step in. Nice article, Jonathan!
Jonathan Weber profile picture
@D. Rider

Thanks for your comment! Glad you liked reading it!
Sighcopath profile picture
My back of the envelope math indicated that not only did GE sell part of the health care business it sold the really profitable parts. Going to be interesting to see if the envelope information was right. If I remember correctly it looked like the margins in HC should drop about 4% to 5%. And just when GE could have used those extra percentage points on the margin. No position in GE for almost 2 years now. Any one know if the HC margins are down compared to before the sale or is that a surprise for next quarter?
Jonathan Weber profile picture

true, they are selling some prime assets in order to pay down debt, which will hurt the long term outlook.
bengalesq profile picture
Really well presented article.
Jorel Boston profile picture
I can't even read the article. The Title is gangsta enough lol. I've always been curious about dropping a few stacks in GE, but every investor says stay away
Jonathan Weber profile picture
@Jorel Boston

Why can't you read the article? You might like it
DimaP123 profile picture
I don't know why you guys don't like GE, but it is awesome stock to trade (not buy and hold)! It has HUGE volume, just trade smaller ranges with bigger volumes.
Jonathan Weber profile picture

It has solid properties for trading, but that's not what I like, and I think many other also prefer long-term investments
DimaP123 profile picture
Yeah, I already figured that out... Here we have more long term investors, not traders.
Jim Cramer not from another word when he said GE is coming back
If Boeing has succeededv in preserving Max orders, does that signal better prospects for
Jonathan Weber profile picture
@Old Wizard

GE will benefit when BA does well. Think this will not happen in the near term, but in the long run.
I agree. Eventually jet engines will recover and people will fly again. I’m in ge pretty low I’ll just hold. I think GE is a perfect example of trying to do too many things. I’ve always felt it’s better to specialize in only a couple sectors
Hachilio profile picture
GE is a loser. Totally. That makes it a value stock, and I like to speculate on deep discounts. IN long at 6$/share!
Jonathan Weber profile picture

Speculation is the right word I think -- could go right, but not at all guaranteed. Good luck!
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.