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Cramer's 'Biggest Mistake'? Owning General Electric's Stock

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Cramer's 'Biggest Mistake'? Owning General Electric's Stock
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General Electric Company (NYSE: GE)'s investor day presentation on Monday disappointed the Street on multiple fronts.

The Expert

CNBC's Jim Cramer said Monday owning General Electric's stock over the years has proven to be a mistake.

The Thesis

Owning GE's stock through a charitable foundation could very well prove to be one of Cramer's "biggest mistakes" throughout his entire career, the CNBC pundit said during Monday's "Squawk on the Street" segment. To his and many shareholders credit, it wasn't very clear how bad GE's business really was and the appointment of John Flannery as CEO was viewed as a catalyst to turn the business around.

Cramer highlighted part of the company's investor day presentation, which discussed management's strategy towards value creation. The problem is the company's outlook calls for value creation in 2019, which may imply that 2018 will be "really, really difficult."

The Stock

GE's stock, at 20 times earnings, is still overvalued, Cramer said. A more appropriate multiple for GE would be 17 times earnings as the stock doesn't deserve a premium multiple compared to superior businesses like United Technologies Corporation (NYSE: UTX) and Honeywell International Inc. (NYSE: HON).

Shares of GE lost more than 5 percent Monday and hit a new 52-week low of $19.00. The stock is now down close to 40 percent since the start of 2017 and even down by 7 percent over the past five years.

Related Links:

GE's Historically Bad Year, Explained

JPMorgan Cuts Target On GE To $22: 'We Don't See The Future Growth Potential'

Image Credit: Tulane Public Relations, CC BY 2.0, via Wikimedia Commons

Posted-In: John Flannery Squawk on the StreetCNBC News Jim Cramer Dividends Media Best of Benzinga

 

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