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General Electric Co. (GE) stock’s fall from grace has been historic.  Since December 2016, the stock has declined by about 70%, resulting in a market capitalization loss of about $200 billion. But interestingly, some of the smartest hedge funds were actively buying the stock during the second quarter.

The stock made it to the WhaleWisdom Heat Map during the second quarter, landing at 12 from a previously unranked position. The heat map assesses the activity of the top 150 hedge funds as determined by the WhaleWisdom WhaleScore calculation.

Rising on the Heat Map

Of the 150 hedge funds included in the heat map ranking, 17 funds own the stock. Nine funds increased their holdings during the second quarter, meanwhile, six of the funds reduced their positions.


Hedge Funds Piling In

Overall, the total number of hedge funds holding the stock rose in the second quarter. The aggregate amount of 13F shares held among hedge funds increased by 13.5% to 568.7 million shares in the second quarter. In total 19 funds created new positions, while 48 added to their holdings, as 14 funds closed out their positions and 49 reduced them.

A Return to Growth?

One reason we may see some hedge funds moving into GE is the anticipation for improving earnings. Currently analysts forecast earnings will climb by 18% in 2020 to $0.72 per share, followed by earnings growth of 27.5% in 2021 to $0.91 per share.

Based on those earnings estimates, the stock trades at roughly 12.4 times 2020 earnings estimates. That earnings multiple is lower than the S&P 500, which trades for roughly 16.5 times 2020 earnings, and it is lower than many of its peers. For example, Honeywell International Inc. (HON)  trades at a one-year forward earnings multiple of 18.6, while United Technologies Inc. (UTX) trades at 15.6.

Despite the appearance of an improving business, future revenue growth is expected to underwhelm. Revenue is forecast to fall by 4% in 2019 to $116.7 billion. That is followed by analysts’ forecast for revenue to fall again in 2020 by 6.7% to $108.9 billion, then increasing by 6% in 2021 to $115.4 billion.

Overall, GE stock has appeared to stabilize in recent months in the $7 to $9 range, and perhaps some investors felt that the stock may be worth the gamble especially if the business begins to improve and earnings growth returns.

This entry was posted on Tuesday, October 15th, 2019 at 8:19 am and is filed under HeatMap, Stock. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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