General Electric Company (GE): An Insider’s Holding Company Bought 10,000 Shares

According to a Form 4 filed with the SEC, William Beattie, a holding company connected to William Beattie purchased 10,000 shares of General Electric Company (NYSE:GE) on April 24^th at an average price of $21.80 per share. Beattie serves on GE’s Board of Directors and so this transaction had to be reported as an insider purchase. The holding company now owns about 31,000 shares, with Beattie owning close to 7,000 shares directly. We track insider purchases because as a general rule it isn’t rational for insiders to buy more shares and increase their company-specific risk; the expected upside must be high to outweigh the benefits of diversification. Studies in fact show that stocks bought by insiders exhibit a small outperformance effect (read our analysis of studies on insider trading).

General Electric Company (NYSE:GE) is coming off a quarter in which revenue was essentially unchanged compared to the first quarter of 2012, though due to a small increase in margins and a lower effective tax rate the company showed a16% increase in net income. However, we would be skeptical that those sources of earnings growth are sustainable as long as revenue remains flat and so would consider GE a low-to-no-growth company. Given that, the trailing earnings multiple of 16 seems a bit higher than we would like in value terms, though Wall Street analysts expect some improvements and as a result the forward P/E is 12. We would note that GE pays a dividend yield of 3.5% at current prices and dividend levels; that isn’t enormously high, but income investors may find the company’s large size to be an indicator of stability (and might also note that dividend payments have been increasing over the past few years).

We track 13F filings from hedge funds and other notable investors as part of our work developing investing strategies (we have found, for example, that the most popular small cap stocks among hedge funds outperform the market by an average of 18 percentage points per year), and can also use our database to find individual filers who have reported large positions in General Electric Company (NYSE:GE). Billionaire Ken Fisher’s Fisher Asset Management owned over 30 million shares at the end of December (find Fisher’s favorite stocks) while large hedge fund D.E. Shaw increased its stake by 35% to over 11 million shares (research more stocks D.E. Shaw was buying). Renaissance Technologies, founded by billionaire Jim Simons, initiated a position of 8.9 million shares during the fourth quarter of 2012 (see Renaissance’s stock picks).