Today, I stayed home to watch the market reaction to the interest rate decision. All through the morning, I had many thoughts about either selling some of my shares of GE and booking the profits or just let them ride.
I was torn between pressing the “Place Order” button on the screen in my account or cancelling the order. I looked at many alternatives. I had the covered calls ready to go for the Dec 18 31.50’s at a limit of ten times the bid, but I could not press the button. I just kept going back and forth many times.
I know that the x div date is the 17th, so the .23 cents is mine if I waited a few more hours. I decided to wait, and at 2:00 when the rate increase was announced, the stock instantly reacted. The stock rose to a high for the day and was closing in on a 52 week high. All was looking good, so I continued to hold steady.
At 2:30, I listened to the GE Investors presentation which I have been waiting for quite some time. I have to say that I was very happy to hear what Jeff Immelt had to say.
Right off the bat, the information was very positive, and I liked the fact that GE is projecting 2016 EPS in the $1.45-$1.55 range. I also like the fact that $18B will be used to buy back shares, and I want to talk about that for a bit.
Just imagine how many shares $18B will buy in a year. Well, it is simple math, and it makes for some intriguing possibilities. For instance, if GE traded 5 days per week buying shares for 52 weeks, they would have to average just over 1,978,000 shares purchased at an average price of $35.00/share each and every day for a year. However, GE plans on doing it the following year also. This is something that should provide some serious upside potential to the stock.
The following article shows how GE might benefit from the buyback and the improvements that the company is currently implementing.
I am sure that on down days, the purchases will be more extensive than up days, however, with GE only buying shares and in turn reducing the float essentially every day, there will be less shares available to buy -albeit a small percentage in any case. However, in this case, less is truly more. The less shares that are in the float, the higher the EPS will eventually be- No doubt!
Also, with GE buying all throughout the year, it should start to push the shorts out and possibly bring about a squeeze to the upside. With every purchase, EPS will be rising ever so slightly, and the potential for stock appreciation should start to creep into the equation. So, with the buyback, I truly see things pushing higher over the next couple of years through buying pressure alone.
About 10 minutes into GE’S presentation, the stock really reacted. It made its way to a new 52 week high and a new multi-year high of $31.23. Although it did not stay at that level, it did break through the resistance and finished the day just short of $31/share at $30.98. It was really a good run today, and I am sure that a lot of people took their profits at the end of the day. Either way, if you owned the stock on the 16th, you will get the dividend today, and I feel that the stock is going to run quite a bit now that it has had a confirmed “breakout.” Tomorrow could be a good day if all things line up, but either way, I chose to stay the course. I made a decision to hold and accumulate until GE regained most of the lost Market Capitalization of the last 14 years or so.
I will have to say that it really was hard to watch as thing were moving and not do anything. Sometimes, I ask myself if I should walk away and play another day. However, GE has actually done much of what I knew had to be done many years ago, and now is the time to see the benefits and fruits of those decisions. I went through all the bad days, and I must say, things were as bad as they could have gotten at that point.
However, now, GE is a different company. It Is on the cusp of becoming the preeminent Industrial company in the world. It is a leader in market share in many dividsions, and the technology being utilized is allowing them to take market share each and every day. I like what I see!
From jet engines to locomotives to windmills and steam turbines, GE is now ready to build the infrastructure of today and the coming decades. Although oil is in the toilet, I feel that this will be a time when GE utilizes its size and scope to find beaten down companies that will bolt right on to the old and gas division. Although time will tell, oil will come back, and if GE aquire those valuable assets, they might have the opportunity to see very profitable years in the decades to come in the oil and gas segment.
Although the dividend did not see an increase, I truly am excited about the prospects of Capital Gains in the coming years. Nelson Peltz has outlined a plan to get GE to roughly $45 by the end of 2017, and from the projections I have seen for 2018-20, $60 is very possible. 2020 is only 5 years away. From the current price, that is a possible double without dividends or reinvestments. I would accept that over a few cents increase in my dividend any day.
So, I have come to the decision to continue to allow the plan to come to fruition. I see a ton of good things in the presentation, and in order for the plan to be accomplished, it will take time. I have waited this long, so a little longer sounds quite alright. I am sure there will days when I see the stock move down hard, but I am also sure that there will be days that the stock moves up in the same manner. With the buyback, slight improvements in sales, margins and cost benefits, and a little bit of luck, GE just might be able to become the investment that I thought it could be.
Robert the DividendDreamer
AKA — Seeking Dividends
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AKA — DividendDreamer