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General Electric Company (GE) Stock Is a Problem Investment

It trades at a six-month low, but that doesn't mean GE stock is a value

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General Electric Company (NYSE:GE) has had a difficult 2017 so far. GE stock is the second-worst performer in the Dow Jones this year, with only Verizon Communications Inc. (NYSE:VZ) seeing a bigger decline, and the seat of General Electric CEO Jeffrey Immelt keeps getting hotter.

General Electric Company (GE) Stock Is a Problem Investment
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Our own Dana Blankenhorn argued in April that it was time for Immelt to go, and activist Nelson Peltz may make his voice heard relatively soon.

Earnings growth has been minimal, even considering a reasonably strong first quarter. For good reason, investors have lost trust in General Electric.

I don’t see that changing anytime soon, nor do I see a six-month low for GE stock as a buying opportunity. Some investors, however, do see a turnaround opportunity in General Electric.

Admittedly, the company has made substantial efforts on that front. But there are just too many problems to consider in GE stock, even at what appears to be an attractive price. In fact, there’s plenty of reason to believe that price will get even cheaper.

The Heavy Lifting Is Done

Turning around a large company often is equated to turning around a battleship. Yet General Electric has made progress toward its turnaround, even if it’s admittedly taken a while.

As CNBC pointed out, 65% of the revenue generated by GE when Immelt was hired has been divested. GE has sold off nearly $200 billion worth of assets that underpinned the GE Capital division. The appliance and water units have been sold as well.

And GE hasn’t just shrunk. The company is trying to acquire oil field services play Baker Hughes Incorporated (NYSE:BHI) and already made a $10 billion deal to buy Alstom’s power division. General Electric has aggressively tried to move into software and the “Internet of Things”. Restructuring efforts have continued: Immelt said on the first-quarter conference call that GE would take $1 billion in costs out in both 2017 and 2018.

All told, there’s been a substantial amount of activity. But it hasn’t done enough for GE stock, which has underperformed the S&P 500 over pretty much every time frame over the past decade. And the primary concern at this point is: what’s left?

There simply aren’t easy levers to pull. The “new” GE looks much like General Electric will look for the next five years. But clearly that business isn’t enough to get investors jumping into GE stock.

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