GE is not a small cap stock but with the nearly daily downgrades the price should be in the teens soon.
This is a repeat recommendation from the Monday newsletter that failed to go out.
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GE - General Electric - Company Profile
General Electric Company operates as an infrastructure and technology company worldwide. Its Power segment offers gas and steam power systems; maintenance, service, and upgrade solutions; distributed power gas engines; water treatment, wastewater treatment, and process system solutions; and nuclear reactors, fuels, and support services. The company's Renewable Energy segment provides wind turbine platforms, and hardware and software; onshore and offshore wind turbines; and solutions, products, and services to hydropower industry. Its Oil & Gas segment offers surface and subsea drilling and production systems, and equipment for floating production platforms; and compressors, turbines, turboexpanders, reactors, industrial power generation, and auxiliary equipment. The company's Aviation segment designs and produces commercial and military aircraft engines, integrated digital components, and electric power and mechanical aircraft systems; and provides aftermarket services. Its Healthcare segment offers diagnostic imaging and clinical systems; products for drug discovery, biopharmaceutical manufacturing, and cellular technologies; and medical technologies, software, analytics, cloud solutions, and implementation services. The company's Transportation segment provides freight and passenger locomotives, and rail and support advisory services; and parts, integrated software solutions and data analytics, software-enabled solutions, mining equipment and services, and marine diesel and stationary power diesel engines and motors, as well as overhaul, repair and upgrade, and wreck repair services. Its Energy Connections & Lighting segment offers industrial, grid, power conversion, automation and control, lighting, and current solutions. The company's Capital segment provides industrial and energy financial services; and commercial aircraft leasing, financing, and consulting services.
Company description from FinViz.com.
GE has been struggling for the last several years. They manufacture hundreds of products from $10 items to $10 million items. After the financial crisis they did everything possible to exit their financial divisions and escape the "too big too fail" SIFI designation. They accomplished that in 2016.
Their biggest problem today is negative cash flow. It is a great company and is in no danger of failing but they are not generating enough cash to cover operating expenses, a 4% dividend and a whopping $21.1 billion stock buyback authorization through 2018.
They have been downgraded by almost everyone and JP Morgan said last week the stock needs to fall to the mid to high teens before it will be investible again. Shares closed at $23.72 today. With the stock nearing a three-year low, the odds are good, once that happens, we will see a continued drop into the teens.
JP Morgan suggested they would be forced to A) cut the dividend, which is not going to happen, B) sell something to raise cash, C) stop the $21.1 billion remaining on their stock buyback.
Shares closed negative on Monday with the Dow up +259.
Earnings Oct 20th.
Sell short GE shares, currently $23.91, initial stop loss $25.05.
Alternate position: Buy Dec $23 put, currently 77 cents, no initial stop loss.
Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps more than $1.00 at the market open.