General Electric is an American conglomerate originally formed by a merger in 1880 of the Edison General Electric Company (started by Thomas Edison) and Thomson-Houston Electric Company. It was one of the original stocks in the Dow Jones Industrial Average in 1898 where it was listed most of the time for the next 122 years. The high point for GE stock was $59 a share in June of 2000 before the dot com crash. It fell to $23 a share by late 2002, rose to $41 a share by 2007 and fell during that crash to $9 in February of 2009. Although its stock price rose to $29 a share by the end of 2016, it was unable to control costs and was not bringing in profits. Its stock fell to the $9 range early this year and is down to $6 with the coronavirus pandemic.
Despite its troubles, GE is still a major player in US technology and manufacturing and, along with companies like Boeing, an important part of American industry. The question for investors is if they can pull things together, make a profit, and come back. Additionally, will they be helped by a bailout as America seeks to keep its technological jewels during these trying times? So, is now the time to invest in GE?
Is Now the Time to Invest in GE?
The Motley Fool raises the same questions in their article, Is General Electric Stock a Buy?
It would be easy to say that the best days of what was once one of the largest and most revered American corporations, General Electric (NYSE:GE), are behind it. After an abysmal last decade versus the S&P 500, it would be hard to argue otherwise.
More important than reminiscing about what GE once was is the question of where GE is going. The company’s cathartic 2018 included the near-eradication of its dividend from $0.24 per share per quarter in 2017 down to just $0.01 per share per quarter, a new CEO, and its removal from the Dow Jones Industrial Average, snapping a 100-year tenure.
That’s about as rock-bottom as you can get. Now, in 2020, it’s time to determine if GE has had its wakeup call, or if there’s more pain ahead.
Their analysis includes the fact that GE has cut its dividend to almost zero and divested itself of unprofitable divisions. More importantly, GE is an industry leader in many areas.
GE is a global leader in industrial manufacturing and technology, most notably in gas and steam turbines for power generation, hardware, software, and platforms for wind turbines in its renewables division, healthcare technologies for hospitals, and jet engines for its aviation division.
Considering its central position in many aspects of American technology and industry, GE may be one of the top companies to be considered for a bailout along with the likes of Boeing.
An aspect of this not mentioned in the analysis by The Motley Fool is that many companies will be badly hurt by a prolonged recession even after the pandemic recedes. Companies like GE that have a strong technological base in several high cost of entry businesses will be best positioned to prosper during an eventual recovery.
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