Foss: Has GE finally turned the corner?

GAZETTE FIILE PHOTOThe main gate at the Schenectady General Electric campus is shown. 
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GAZETTE FIILE PHOTO
The main gate at the Schenectady General Electric campus is shown. 

Categories: -The Daily Gazette, Sara Foss

I began keeping close tabs on General Electric’s stock back in August, while reading “Lights Out: Pride, Delusion and the Fall of General Electric.”

The book, written by two Wall Street Journal reporters, unfolded like a horror story, tracing the fall of one America’s most storied companies. The collapse, when it finally came, was almost painful, and I expressed doubt that GE would ever fully recover.

“I’d like to see GE recapture some of its old glory,” I wrote, in a column printed earlier this year. “But will it? ‘Lights Out’ doesn’t provide an answer. If anything, it offers plenty of reasons for wariness.”

Of the company’s stock, I wrote, “I’m not seeing or hearing anything that makes me want to buy.”

In response, one reader wrote to say that while the stock “doesn’t seem that attractive,” he had purchased a small stake in GE. “At seven or six dollars a share it is an affordable gamble in what used to be a real winner,” he said.

His comments stayed with me, and in October I succumbed to temptation and bought my own very small stake in the once-formidable company.

I viewed my investment as something of an experiment – if the company faltered, I wouldn’t lose much money; if it flourished, I would benefit. Either way, I’d gain some firsthand knowledge of what it was like to be a GE stockholder as the company attempted to retool and return to its dominant position in the U.S. business landscape.

A month later, I’m feeling pretty good about my tiny investment in General Electric.

The stock has performed well, and a strong third-quarter earnings report on Oct. 30 sent it soaring an impressive 11.5 percent. It marked the stock’s fourth biggest gain since March 9, 2009, when the S&P 500 and Dow Jones Industrial Average hit their Great Recession nadirs. On Friday, the stock popped again, with shares climbing 5.6 percent.

Will this good news continue?

Has GE turned a corner?

Even now, as I enjoy the fruits of the company’s recent success, I remain unsure about GE’s longterm prospects.

I’ve sometimes wondered whether the company’s efforts to cut costs and improve operations are doomed to fail – whether a large industrial conglomerate can survive, much less thrive, in the 21st century. Perhaps GE was simply too big, too bogged down in debt, to adapt to changing business realities.

My questions about GE’s future haven’t gone away, but there appear to be real reasons for cautious optimism.

The financial and investing website The Motley Fool has been a reliable source of skepticism about the company’s stock, writing in early October, “General Electric is a household name, but that doesn’t mean it’s a good stock to buy. In fact, the industrial icon has been working on a turnaround since the 2008-9 Great Recession. It hasn’t been a particularly smooth ride, and while some parts of its operations are improving, others are still pretty bad.”

Now some of the site’s analysts are singing a different tune.

“Could GE finally be on the verge of a turnaround?” former Wall Street stockbroker James Brumley wrote on Nov. 6. “For the first time in a long time, it appears possible.”

In his piece, Brumley pointed to a “glimmer of hope” for the company – GE’s power business, which “seems to be stabilizing after years of deterioration. Even a modest recovery on this front could lift the company’s results in a big way, as it was at one time GE’s biggest business.”

One encouraging sign: In mid-October the Wall Street firm Goldman Sachs gave GE a “buy” rating, calling the company “the ultimate self-help, vaccine-leverage story” and predicting that it will be a stronger company in the post-pandemic economy.

That investors are suddenly so bullish on GE is due in large part due to the fact that the company can’t sink much lower. Investors are becoming increasingly convinced that the company’s stock have been undervalued, and that growth really is just around the corner.

Of course, Wall Street analysts aren’t always right.

One of the reasons GE’s fall from grace came as such a shock is because the company’s sterling reputation made it hard for people to see that an iconic American business was headed for a meltdown of epic proportions.

I don’t know what GE’s next chapter will be.

But for those of us who have decided that now is the time to invest, it’s bound to be an interesting ride.

Reach Sara Foss at [email protected] Opinions expressed here are her own and not necessarily the newspaper’s.

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