Why General Electric Company (GE) Stock Has a History of Winning

May I be frank with you? General Electric Company (NYSE:GE) is a bit of a bore, and that’s putting it mildly. In fact, of the thousands of investments available, GE stock is the one I dread analyzing. Amazon.com, Inc. (NASDAQ:AMZN) has the sexy industry, Tesla Motors Inc (NASDAQ:TSLA) has the sexy CEO — or so I’ve been told — and Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) basically owns sex. General Electric? It has a 3.23% dividend yield — I think you’re getting my drift.

Why General Electric Company (GE) Stock Has a History of Winning
Source: Shutterstock

That’s not to say that GE stock is irrelevant in the current markets. This week, the Dow Jones Industrial Average hit 20,000 points for the first time in history.

Not only is General Electric a component of the Dow 30, it was a strong contributor to the record. GE stock turned in a 1.23% performance against its prior session. The average gains for the Dow-listed companies on the record-breaking day was only 0.6%, which is surprisingly low.

In fact, there were only six companies that posted better numbers than GE, and these were the usual suspects. In increasing order, they were International Business Machines Corp. (NYSE:IBM), Goldman Sachs Group Inc (NYSE:GS), JPMorgan Chase & Co. (NYSE:JPM), Apple Inc. (NASDAQ:AAPL) and standout Boeing Co (NYSE:BA), which ringed up an impressive 4% move.

Besides the obvious point that these companies are proudly red, white and blue, it’s easy to see why they performed so well over the others. President Donald Trump has promised fewer regulations stymieing business, more support for the military industrial complex and keeping jobs stateside. General Electric belongs among the titans of American industry; hence, yesterday’s robust gains.

But is the recent surge of GE stock based on optimism for President Trump, or a reaction from pronounced volatility? The answer to that question is critical for investors.

GE Stock Is Exciting, and That’s Bad!

GE has shed its boring image, but for all the wrong reasons.

GE stock, General Electric
Click to Enlarge
Source: Source: JYE Financial, unless otherwise indicated

While it’s very early into the new year, nevertheless, it’s worth pointing out that shares are down 4%. I should also mention that at this price point, GE stock is firmly below its 50-day moving average, and only a hair above its 200-DMA.

I don’t think the volatility should be ignored as a bunch of technical mumbo jumbo. Just a few days ago, General Electric shares were down 6%.

More worryingly, traders haven’t pushed the needle that far since GE faltered under the weight of an uninspiring and anemic fourth quarter of fiscal year 2016 earnings results.

Rightfully, people are concerned. True, GE stock is a reliable investment, making steady gains through all sorts of economic cycles. At the same time, its stable nature can work against the investor if there’s a sharp downfall. It may take an inordinate amount of time for General Electric to gain 10%, but it could be gone in a flash. As an example, GE returned 6% last year — and we’ve basically burned through two-thirds of that profit.

I don’t care how high the dividend yields are for General Electric. No one can afford to lose that much capital and justify the losses due to the passive income. Unless GE stock was offering double digits, it’s a bad deal. Of course, the question would then become, why are they offering double digits?

Just Stay the Course With General Electric

So should potential buyers heed the warning? Absolutely, they should! GE stock has formed an “inside day” pattern against the losses incurred by the feeble earnings report. Unless shares can quickly fill the technical gap, momentum definitely leans bearishly. Attempting to catch a falling knife here would not be the greatest idea.

That said, the month of January is GE stock’s kryptonite. The last three Januarys produced a shockingly bad loss of 6%. Since 1962, General Electric has averaged only 0.8% returns for the opening month of the calendar. In nominal terms, there were only 28 positive Januarys over that time frame. That means that GE stock is as useful as a coin toss during the NFL playoffs.

However, the industrial titan is a consistent winner over the long run. By the end of the year, GE stock is good for an average 13% return. Nominally, 39 years ended sunny side up. This current decade has been particularly robust, averaging over 15%.

I’ve made this argument before, but it really comes down to your end goal. If you’re looking for a hot growth stock, look elsewhere, please! If you want to bide your time and not rock your portfolio with risk, GE stock is a prudent choice.

But even reliable names have their off seasons. Watch General Electric closely, and wait for a baseline of technical support before going in too rich.

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2017/01/general-electric-company-ge-stock-history-winning/.

©2020 InvestorPlace Media, LLC