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General Electric - A New Era

|Includes: General Electric (GE)

The era of Jeff Immelt came to an abrupt end on Monday. Since then, General Electric has made a few key announcements. Obviously the biggest announcement was naming the new CEO John Flannery: a change agent and former CEO of GE healthcare, GE Power named Russell Stokes its new CEO, and lastly, approval of the Baker Hughes deal with some contingencies.

Investors are somewhat overwhelmed with all the flurry of news coming out of the woodwork. However, the most important thing to focus on are the successes of the incoming CEO.

From GE's website:

Mr. Flannery, 55, began his career at GE Capital in 1987 where he focused on evaluating risk for leveraged buy-outs. In the 1990s, he was a leader in the corporate restructuring and workout group, where he was known for his negotiating skills and ability to improve companies' operations. In 1997, he moved to Argentina where he successfully led GE's Equity business in Latin America and the overall GE Capital business for Argentina and Chile.

At any rate, Scott Davis of Barclays bank through Barrons said in a note dated 06/15/2017 called one remaining piece of GE Capital, GE Capital Aviation Services, "a fantastic asset." They explain why:

GECAS is a fantastic asset, making up more than half of the GE Capital verticals' asset base and almost ¾ of its profits/cash. Aircraft leasing is a lucrative and relatively stable business with favorable cyclical and secular market dynamics. The market is becoming an oligopoly with increasing concentration amongst a few key players, and GECAS is the clear leader. Large global players benefit from significant advantages, including large discounts to the latest next-gen aircraft and valuable relationships with top-tier airline customers. From a cyclical perspective, air traffic growth remains strong and lower oil has resulted in strong airline customer profitability. There are also secular tailwinds from a growing global middle class, as well as airlines increasingly choosing to lease their fleets.

They also say it's an asset that's underappreciated by investors. It shouldn't be. "We estimate that GECAS will help deliver ~$1.3-1.4B in run-rate free cash flow going forward...not an insignificant amount relative to GE's ~$9B Industrial FCF in 2016,"

As an investor, you have to pay attention to the chart of GE which just crossed and closed above the 50 day moving average. This is indicative of interest in the stock. Coupled with this, a 3% dividend yield keeps you paid while you wait. I mentioned today in a microblog on another site that I believe that this Company is grossly undervalued.

Disclosure: I am/we are long GE.