General Electric Stock May Be Due for an Uptick

With the GE stock price largely moving on emotions, speculative bulls could have their day too

With so much ugliness impacting long-embattled General Electric (NYSE:GE), the company could use any good news. Even the absence of bad news would be enough to help General Electric stock. Certainly, at this point, it couldn’t hurt. Sure enough, the organization is getting exactly that.

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About a month-and-a-half ago, accountant and financial investigator Harry Markopolos accused General Electric of accounting fraud. In supporting this massive allegation, Markopolos produced a 175-page report supposedly detailing the shenanigans. Not surprisingly, the GE stock price dropped on this bombshell allegation.

I’ll admit that I didn’t read every page of Markopolos’ report. However, I took the time to analyze some of the key accusations for myself and not rely on mainstream hysteria. I wasn’t very impressed. From my perspective, the fraud claims featured wild leaps in deductions. Still, that didn’t spare the GE stock price from extreme volatility.

In this case, Markopolos’ reputation preceded him. Famously, he exposed Bernard Madoff’s Ponzi scheme. As a result, when he pointed his finger at GE, General Electric was already doomed.

At the time of the accusation, though, many analysts emphasized that Markopolos had a financial interest in seeing the GE stock price tumble. That raised eyebrows. Now, at least at time of writing, the website where you can download the official report is down.

Of course, I don’t want to fuel speculation with more speculation. Maybe this is just a technical issue. However, it’s a significant detail that will surely give market observers some pause. But what does this actually mean for General Electric stock moving forward?

General Electric Stock Seduces a Risky Trade

Ultimately, the website going down (whether permanently or temporarily) doesn’t do much for General Electric stock. It’s still a fundamentally risky investment. As well, management has an uphill, almost vertical wall of obstacles to climb.

But like I said above, I think it’s a significant detail. Moreover, it’s something that will play into traders’ emotional profiles. Of all the investments that we cover, the GE stock price is very much susceptible to emotions.

For instance, when the markets first learned about the Markopolos report, short sellers jumped in like piranhas. And of course, they succeeded in their presumably near-term objective: bring down the GE stock price and collect a quick profit.

However, it’s fair to point out that the short sellers likely reacted to the news without fully investigating the allegations. When famous (or infamous) short-selling firm Citron Research blasted the Markopolos report as “disingenuous,” that’s saying something. As Citron stated in a Twitter (NYSE:TWTR) post, “Aggressive accounting is not fraud.”

Thus, here is evidence that traders reacted to emotions rather than the fundamentals. If they had carefully looked at the report itself – and not someone’s interpretation of it – they would likely come to the conclusion that this was a hit job. Moreover, its credibility was largely based not on facts but on the accuser’s reputation.

But because short sellers jumped on the trade so firmly, this dynamic suggests the opposite may be true: speculative bulls can also swing the GE stock price higher on less-than-credible news or potential catalysts.

Plus, because General Electric stock has traded in the gutter for so long, much of the bad news is baked in. Any positives with a hint of legitimacy could help attract discount buyers.

Emotions Drive GE Stock

One possible tailwind is General Electric’s offshore wind turbine project. Although renewable or clean energy platforms have gained incredible mainstream popularity, many of them require substantial real estate. And wind turbines are among the most land-intensive platforms.

Adding to the problem, they’re also ugly. Yes, this is subjective reasoning. Still, I don’t think anyone wants to see giant propellers spinning in their backyard. In fact, GE addressed the concerns about wind-turbine noise when in their close proximity.

So, what’s the company’s solution? GE is actively installing wind turbines that work outside coastlines. Moreover, management can push this offshore system to other parts of the world with favorably windy conditions.

Admittedly, this isn’t a panacea for General Electric stock. As a longer-term investment, the company has many rough obstacles ahead. But given that shares are trading on emotions, it’s not inconceivable that this or other compelling news could finally move them the other way.

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/2019/10/general-electric-stock-may-be-due-for-an-uptick/.

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