Sell GE before it is really too late

  |  by Alexander Chepakovich   |  Primary ticker: GE

GE share price is just a reflection of the company’s former CEO pathetic performance. In substance, things are not going to change under his successor. It is all about the culture of “appearance first” and self-praise.

General Electric’s share price has risen on the news that Jeff Immelt stepped down. It took the board of directors 16 years to realize that the man was just a nice guy, but not really a business person. The company has been way too long resting on the laurels of Jack Welch’s legacy. The share price during Jeff Immelt’s tenure is just a reflection of his pathetic performance.

So, what went wrong at GE and is the company’s former CEO really the culprit? I think the problem is much deeper and cannot be solved by simply changing the man on the top. The problem lies in the company’s culture – contrary to the popular belief that it is one of the best in corporate America. It used to be great, vibrant and dynamic, but by the end of the last century things started to change to the worse: it became all about politics and appearances rather than business and substance. What’s more troubling – GE’s top brass became so self-assured on them being the best of the best that they did not even bother to question correctness of their own decisions.

The preoccupation with appearances lead, among other things, to selling businesses at any sign of trouble (that are unavoidable due to business cycles) and pathetic forays into trendy sectors where GE had no chance of becoming a leader.

By the way, one does not need to analyze a lot of operational and financial data in order to see whether a business leader will bring about results. A person usually reveals himself in any conversation and not-scripted answers to reporter questions. What Immelt said in interviews on his departure just makes me wonder why GE has managed at all to keep its premier position in some sectors at all. By the way, judging by the talk of his successor, John Flannery, things are not going to improve at GE. So, my recommendation is to sell the company’s stock before it goes much-much lower. It might sound heretical, but I do not think that things will improve at the company until they hire a CEO from outside.

Visitor comments

Comment Date and author
The model is just a calculation algorithm that takes historical financial statements data and current macroeconomic parameters as inputs. It does not account for quality of management, nor product pipeline, not for other "qualitative" assessments and personal judgments.
Also, please take a look at the time the article itself was written - the price of the GE stock was much higher then.
30-11-2017 21:17
Alexander Chepakovich
Do you realize your model actually suggests a BUY for GE at this time? How do you explain that? 29-11-2017 19:28
Ron

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