General Electric (GE) popped up by over 10% yesterday after announcing sale of its finance segments as well as selling off its real estate assets totaling over $26 Billion. GE also announced a massive buyback of $50 Billion buyback program through 2018 and expects to reduce the outstanding share count by about 20%. All this information caused the stock to reach a 52-week high of $28.68. Though this is just a pop due to investor frenzy and I expect the stock to drop a bit in the next few days/weeks, I am hoping that these are nice moves for the long-term performance of the stock.
GE was one of the very first stocks that I purchased when I started investing in 2009. It has been almost 6 years since I first purchased 30 shares of GE at $13.03 on 6/15/2009. I have been a fan of GE stock and since then I have added more shares often. My last purchase was for 100 shares at $25.00 on 1/27/2014. Right now I hold 375 shares in my accounts combined and based on Friday’s (4/10/2015) closing price of $28.51, my total value in GE stock exceeded $10,000 thus giving me my first $10K stock in my portfolio. GE currently pays a quarterly dividend of $0.23/share and yields a reasonable 3.23% even after the pop yesterday. GE has been increasing the dividend from 2009 after cutting it during the financial crisis.
But the journey has not been a great one. Long time investors in GE are still upset about the stock’s performance the last few years. The stock has not recovered the hits it took during the financial crisis and also not yet reached the dividend levels it had before the crisis.
Since mid-2009, the stock has performed reasonably similar to S&P 500 and Dow Jones as seen below.
But taking it a bit further, the stock has definitely lagged the broader market as seen below.
Graph Source: Google Finance.
The main reason for the very poor performance is the hit the stock took during the financial crisis. GE Capital’s exposure to the financial crisis led to the GE stock taking the brunt and has not recovered since then. The company has been slimming down since last year to return to its industrial core by spinning of GE Capital as Synchrony Financial (SYF). GE still owns a large chunk of SYF shares, but will be divesting completely by the end of the year. I hope the things have started to change since GE decided to return to its industrial roots and have been selling or spinning off non-industrial assets.
With the increase, GE became my first $10K stock and I hope that this is just the first of many more $10K stocks.
What do you think of GE’s decision to return to its industrial roots and market’s reaction to this news?