General Electric (GE) — a fallen angel that has been a long-standing recommendation in our model portfolio — was our Top Pick at the start of the year; the stock has since risen 29%, notes Jim Powell, international investing expert and editor of Global Changes & Opportunities Report.
GE is a classic example of what can happen to a company that strays too far from its roots. During the heady years in the early 2000s of booming real estate prices and financial deal making, the company jumped in with both feet.
When those opportunities collapsed during the Great Recession of 2007 to 2009, GE was left with huge losses. At the same time, the contracting economy damaged the company’s industrial operations. During the Great Recession, even the company’s core businesses struggled to remain afloat.
In April 2018, GE installed Larry Culp as their new CEO to turn the company around. Since then Mr. Culp has been ruthlessly eliminating underperforming operations and redirecting the company’s resources to its most successful operations. Under Mr. Culp’s leadership, all four of GE’s principal businesses have been bouncing back.
Aviation (primarily GE’s powerful and efficient jet engines) should do especially well as people throughout the world start to travel again. The company just received FAA certification for its promising new GE9X engine — the most powerful and efficient in its class. The new engine should find many buyers in the highly competitive airline industry where fuel savings boost profits.
GE Power should also have a good year as the global economy recovers from the Covid-19 recession — and so does the demand for electricity.
GE Renewable Energy should do even better as solar and wind power make significant advances this year. Green power should also benefit from additional government incentives that are included in President Biden’s infrastructure programs.
GE Health Care may not see the strong bounce that I expect from the company’s other operations — but another year of steady growth should generate more cash and profits.
I think 2021 will be an important turnaround year for GE. It will take another two or three years to complete. Along the way, GE should generate additional profits for investors.
