This past week, shares of General Electric Company (NYSE:GE), one of the companies with the longest track record on the Dow Jones Industrial average, were de-listed from the exchange, replaced by Walgreens Boots Alliance Inc. (NYSE:WBA) in a move which has highlighted the volatility with which the market is continuing to price in to firms with higher than average debt loads.
After years of acquisitions which has turned General Electric into one of the largest global conglomerates for industrial goods, rising interest rates and a reduced appetite for companies with less attractive balance sheets has continued to lead to a decline in valuations for such firms, with investors largely choosing blue chips with "less risky" balance sheets and opportunities for future organic growth over firms which require acquisitions to boost growth.
This iconic move has taken markets by surprise, considering the more than 100-year consistency of General Electric being placed on the Dow.
Investors in General Electric have taken note of the company’s share price decline, bidding up shares of the conglomerate over the past week, perhaps indicating such a move may have been unwarranted. The company’s reasonable forward price to earnings ratio of 13 combined with a healthy forward dividend yield of 3.8% are enough to keep many investors happy, and invite value investors to take a deeper look at GE, as this decline has brought the global conglomerate to the top of most investor’s news feeds in recent days.
While I wouldn’t go so far as to call GE a value stock at this time, General Electric is a company I will be following in the coming quarters, as the company works toward resolving a number of issues including an investigation into a $15-billion hit it recently took relating to its insurance unit.
Invest wisely, my friends.
