General Electric: Is this Fallen Angel Read to Rise?

08/16/2019 5:00 am EST

Focus: STRATEGIES

Jim Powell

Principal Analyst, Global Changes & Opportunities

During my half-century in the investment industry, I have made more money from fallen angels than from any other stocks, explains Jim Powell, editor of Global Changes & Opportunities Report.. 

Fallen angels are successful blue chip companies that get into trouble for one reason or another, and their stocks plunge. The companies usually have the personnel and financial resources to solve their problems and deliver exceptional gains to their investors.

General Electric (GE) started to get into trouble several years ago when it strayed from its core businesses in power generation, transportation, and healthcare into areas where it had little expertise. 

Those businesses soon faltered and started to spout red ink. The worst of the group was the financial services unit that took a swan dive into the basement when the US economy plunged in 2008.

GE’s problems were followed by a series of management shakeups and ham-handed attempts to turn the

ailing operations around. Finally last year, a new CEO, Larry Culp, was brought onboard who knew the only solution was to dump the underperforming operations and refocus the company on its strengths — and that’s just what he has been doing.

I think GE started to turn the corner the day Mr. Culp walked through the front door. A great deal of progress has already been made — and a lot more is planned. The recovery will probably take three years. Along the way, I expect the stock to deliver outstanding gains.

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