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Another psychological blow for GE and its shareholders

Another psychological blow for GE and its shareholders

Little financial impact seen as GE removed from Dow Jones industrial average
Another psychological blow for GE and its shareholders
The main gate to General Electric's Schenectady facility is seen on Wednesday
Photographer: Marc Schultz/Daily Gazette Photographer

General Electric’s long-suffering stock briefly hit its lowest price in 52 weeks during Wednesday's trading session, following the decision to remove it from the Dow Jones industrial average.

It’s the latest blow for GE investors, but as of Wednesday afternoon, the impact seemed as much psychological as financial: The stock’s price bounced back somewhat to close down 0.54 percent on a day when the Dow as a whole was down 0.17 percent.

GE has long been a symbol of American heavy industry and innovation; it was the last original member of the Dow Jones, and its replacement by health services company Walgreens Boots Alliance is not only a blow to GE but a symbol of the changing profile of U.S. business.

General Electric was formed in Schenectady in 1892, and while its headquarters has long since moved elsewhere, the region is still home to thousands of current and former employees, many of whom own GE stock.

Two area investment advisers whose client list draws from the GE community said Wednesday that 1) GE stock is not a good investment; 2) they’ve long been counseling their clients who own it to divest; and 3) no clients called to express dismay about the Dow announcement.

The damage to GE stock is already done, said Jason MacGregor, of Minich MacGregor Wealth Management in Saratoga Springs: The impact of getting booted from the Dow is mainly psychological or symbolic.

“We’ve been kind of thinking that might happen, but not this soon,” he added.

As of midafternoon, he’d had no client calls, unlike on Nov. 13, when GE cut its dividend in half. He got an earful then.

“That really hit people in the pocketbook,” MacGregor said. “So many retirees were holding onto it for the dividend.”

He has dozens of clients who are current or former GE employees, many of whom held onto their stock for decades for sentimental reasons.

“The emotional attachment is gone,” he said, but once upon a time, there was a sound basis for it.

Also See: GE retirees lament company's slide

MacGregor recalled starting his career in Glenville, a hot spot for GE stockholders, and thinks he would have been fired for suggesting investors ditch the stock, which was soaring at the time.

“It’s been dead money for 10 years,” he said. “It’s nowhere near the stock it used to be.”

Kerry Mayo, of Capital Financial Advisors of New York in Clifton Park, said being removed from the Dow won’t help GE’s share price because it will no longer be part of indexed investments that track the Dow. But there aren’t nearly as many Dow funds as there are for other indexes, such as the S&P 500 or Russell 1000. 

Mayo said that, in the wake of the Dow announcement, he hadn’t heard concerns from clients who own GE stock. These are mainly people who held on to it to avoid a tax hit, or in hope for a turnaround, he said, and they do so against his advice to diversify out of GE and other individual company stocks.

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