General Electric (NYSE: GE) is having a bad month, one not seen since the great financial crisis. The conglomerate hovered near yearly lows after cutting its dividend. But there is hope, after the new CEO, John Flannery, disclosed he bought 60,000 shares at $18.27 ($1.1 million total).
GE stock is dirt cheap at a 21x P/E and 16x forward P/E. The CEO stock purchase is not a catalyst and prudent investors will look for more. GE has yet to turnaround its business units, reverse the lowered credit rating, cut its debt, and resolve the pension shortfall.
Change at GE will happen but at a very slow but measured pace. The CEO said that the company’s turnaround will bear fruit after two to three years.
The more GE stock falls, the more interesting the company will be to value investors. Remember: Intel (NASDAQ: INTC), Cisco (NASDAQ: CSCO), and Microsoft (NASDAQ: MSFT) all fell to multi-year lows as it rebuilt its business.
GE is in the same boat. It is fixing its businesses and the efforts will not bear fruit right away.
Takeaway
At a stock price in the $17 - $18.50 range, GE looks inexpensive. Patent investors will get rewarded if the CEO fixes the company. At the same time, GE is a potential value trap so any entry point is questionable.
Continue evaluating the CEO’s turnaround efforts. Higher revenue and profitability will signal the company is on the right path.
