The painful year as been a boon for investors who have placed big bets against the legacy industrial conglomerate. GE has proven to be this year’s second-most profitable short trade, according to financial technology firm S3 Partners. It is the third most shorted stock in the worldwide industrial conglomerate sector, behind Toshiba and 3M.
Ihor Dusaniwsky, S3’s head of research, estimates profits on the GE short to be $673 million this year, a 36 percent gain. A short sale involves selling borrowed stock, hoping it will fall in price so the stock can be returned later at a profit.
UBS cut its price target to $13 from $16 for GE shares, saying GE’s power business will likely “require even more aggressive cost reductions, force GE into a vicious cycle.” J.P. Morgan brought its price target all the way down to $10 a share, saying the firm now assumes “weaker results at power and some franchise value impact” for GE.
Dusaniwsky said the company’s stock drop over the past six months has been seen as a “death cross” by technical traders, who are seeing heavy selling by institutional investors. A death cross is a pattern that indicates the potential for a selloff. Meanwhile, the amount of money the shorts are betting against GE has increased 10 percent over the last month, bringing GE’s total short interest to $1.36 billion, according to S3.