Why General Electric (GE) Stock is a Compelling Investment Case

Vulcan Value Partners recently released its Q2 2020 Investor Letter, a copy of which you can download here. The Large Cap Composite fund posted a return of 24.5% for the second quarter (net of fees), outperforming its benchmark, the S&P 500 Index which returned 20.5% in the same quarter. You should check out Vulcan Value Partners’ top 5 stock picks for investors to buy right now, which could be the biggest winners of the stock market crash.

In the said letter, Vulcan Value Partners’ highlighted a few stocks and General Electric Co (NYSE:GE) is one of them. General Electric Co (NYSE:GE) is a multinational conglomerate company. Year-to-date, General Electric Co (NYSE:GE) stock lost 41.3% and on August 27th it had a closing price of $6.48. Here is what Vulcan Value Partners’ said:

“We have followed General Electric Company for many years. We liked its attractive assets; however, these were more than offset by mediocre businesses, especially GE Capital, and management’s poor capital allocation decisions. As a result, General Electric was removed from our MVP list several years ago. The company has since implemented a vast restructuring program to simplify the industrial side of its business and drastically shrunk GE Capital. Larry Culp, the former CEO of Danaher, became CEO of General Electric in 2018. We have long admired both Larry Culp and Danaher. He has accelerated the restructuring process by selling the rail transportation business, further shrinking GE Capital, reducing General Electric’s stake in Baker Hughes, and selling their biopharma business. We have continued to follow General Electric’s progress and now are happy to report, we believe it is once again a very good business. General Electric’s most valuable division is its world class aviation segment, which is part of a global oligopoly. Its strong jet engine business will profit from long-term service agreements, generating margin improvement for many years to come. While the pandemic is negatively impacting General Electric’s aviation business in the short run, it is also giving us the opportunity to buy General Electric with a substantial margin of safety. Its other industrial segments including healthcare, power, and renewable energy, all have strong competitive advantages as well. GE Capital, which we estimate has a negative value, is no longer material to General Electric’s overall value. With net cash on its balance sheet and a strong liquidity position, General Electric is once again a MVP company, and we are pleased to add it to the portfolio.”

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In Q1 2020, the number of bullish hedge fund positions on General Electric Co (NYSE:GE) stock decreased by about 3% from the previous quarter (see the chart here), so a number of other hedge fund managers don’t seem to agree with GE’s growth potential. Our calculations showed that General Electric Co (NYSE:GE) isn’t ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock.. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. You can subscribe to our free enewsletter below to receive our stories in your inbox:

Disclosure: None. This article is originally published at Insider Monkey.