General Electric just had its best month ever.
Shares rose just over 34 percent in January — the largest monthly gain in the company’s 127-year history. January’s jump was in large part due to the company’s fourth-quarter revenue beat, boosted by strong performance from the aviation business.
But January’s performance notwithstanding, it hasn’t exactly been smooth sailing for the company, to put it mildly. The stock is down 64 percent in three years, after getting hit hard by struggles in the power segment and GE Capital, as well as a lack of investor confidence in the company’s management team. In 2018 alone, the company lost almost $90 billion in market value.
As the Street watched the stock tick lower, investors began to ask just how far the stock needed to fall before it would be a buy.
That point may have finally been reached.
With the stock off its lows but miles from its high, and a new management team in place that’s provided clarity on a turnaround plan, Point View Wealth Management strategist John Petrides and Newton Advisors technician Mark Newton say now could be the time to buy shares of GE.
“If you’re looking at the next six months, GE’s going to have to do a lot fundamentally to convince investors … but if you’re looking out 12 months to 18 months I think the worst is in,” Petrides said Friday on CNBC’s “Trading Nation.”
Lawrence Culp took over as chairman and CEO in October following John Flannery’s short-lived tenure at GE’s helm. Petrides views this as a key positive catalyst that could unlock value in the stock.
“The ball is now in Larry Culp’s hands to turn the company around from a fundamental standpoint. I mean GE had a fundamentally broken story with a black box for a balance sheet. That’s not a good look for the stock. And what we got out of this past earnings call was that the black box balance sheet is hopefully behind us because there are no more write-offs in GE Capital. So now the faith goes into Culp’s hands to be able to turn the company around,” he said.
Like Petrides, Newton believes the stock could be a long-term buy. But in the near term, he advises caution since he thinks it’s still in a sharp downtrend.
“Near term I still see the potential for a bit more on the upside, but I think that’s going to be capped out near $12 … You know unfortunately GE still has a very strongly negative momentum on a weekly and monthly basis,” he said.
For now, he argues that traders should sell the pops and buy the drops.
GE sank to a nine-year low of of $6.66 on Dec. 11, a move that Newton called “monumental” since it was almost exactly where the stock “bottomed out in 2009, within a few ticks.” While the stock has bounced off that low, he doesn’t see a significant positive base building. In Monday’s premarket, it was at $10.26.
“Technically speaking it’s still very much in a downtrend, so you use a first rally to sell into and you look to buy dips,” he said.