Despite having once served on an economic board for President Obama, General Electric Company (NYSE:GE) CEO Jeff Immelt is a lifelong Republican. GE stock should be the perfect stock for the Trump era. It is a U.S.-centric industrial manufacturer employing thousands of American workers for good wages.
With its deal to combine its oilfield operations with those of Baker Hughes Incorporated (NYSE:BHI), it’s even big in the oilpatch.
However, GE stock under Immelt is no place to invest if you want to get rich. Since the bottom of the post-crash market in 2009, GE’s performance has barely kept pace with that of the S&P 500. Over the last year, while the average S&P stock is up 15%, GE is down by 2%.
The best reason to buy the stock is the dividend, 24 cents per share, a yield of 3.2%. Most years, like last year, it can cover that dividend with earnings.
Immelt is a veteran politician who has been looking to the future for years without delivering one. Smart money is no longer listening. Yet Immelt will go down in business history as a great salesman, because like an errant husband, each promise seems to land on someone who wants to believe it.
But the goals Immelt has trouble meeting are modest. For its first quarter, which GE will report on April 21, analysts are only expecting earnings of 17 cents per share on revenues of $26.36 billion. That is less than half what it earned in the December quarter, on a quarter less revenue.
Immelt also keeps moving pieces around his board. Most recently he talked about selling the company’s light bulb business, following similar moves by Siemens AG (ADR) (OTCMKTS:SIEGY) and Koninklijke Philips NV (ADR) (NYSE:PHG), which figured out years ago that people don’t replace long-lasting LED bulbs once they are installed.
How much will General Electric book by making this great move? About $500 million. On a market cap of almost $262 billion, that’s pocket change.
Yet you’re always going to find people pounding the table for GE stock, claiming Immelt still has aces up his sleeve. Oil is up, and so the Baker Hughes bet will pay off big. Besides, Immelt might leave after the Baker Hughes deal is done. That will certainly be a catalyst for higher prices.
Immelt’s exit may be the stock’s only hope. Everything he touches turns into tin, and what he lets go turns at least into silver.
Take Synchrony Financial (NYSE:SYF), the credit card unit spun out to shareholders in 2014. Since then, Synchrony is up 43% and GE 13.5%.
If you think that sounds good for GE, the S&P 500 is up almost 19% since then.
Time to Get Out of GE Stock
I finally got out of General Electric in January for $31.41 per share. GE opened for trade April 12 at just a hair under $30.
Yet the average rating for GE is still overweight. Half the analysts who follow the stock have it on their buy lists, against just one with the courage to say sell.
GE is a big company. It will continue to make big sales. It will keep buying other companies at the margins of its current operations and some of its options will keep looking interesting.
But it is time to put a period on the Immelt era. The high-flying entertainment and finance company of Jack Welch has been reduced to a helpless industrial giant, a widows-and-orphans stock that barely manages to earn enough to pay those dividends.
This will remain the case until Jeff Immelt is in GE’s rear-view mirror. When he is gone I might be interested in GE stock, but only when he is gone.
Dana Blankenhorn is a financial and technology journalist. He is the author of the sci-fi novella Into the Cloud, available at the Amazon Kindle store. Write him at firstname.lastname@example.org or follow him on Twitter at @danablankenhorn. As of this writing, he did not hold a position in any of the aforementioned securities.