April 13, 2015
On Friday General Electric announced that it is selling a majority of its banking business (GE Capital) to focus on its best performing segments. G.E. is looking to return to being one of the strongest industrial companies in the world. Since the financial crisis, it has been taking steps to reduce its finance operation by selling smaller pieces off over the years--most notably, the credit card arm that is now known as Synchrony Financial.
General Electric started the announcement last Thursday with the sale of its real estate assets. Wells Fargo and a private equity firm, Blackstone, bought a bulk of G.E.'s factories, commercial loans and apartment complexes.
Shareholders were thrilled with the announcement and responded by pushing the share price up nearly 11% on Friday to levels not seen since before the financial crisis. Shareholders were mostly excited that G.E.'s board has authorized a share buyback program of up to $50 billion and they will return nearly $90 billion to shareholders through buybacks and dividends by 2018.
General Electric has been a dog for years, however with the renewed focus on their more profitable business segments and determination to deliver value back to their shareholders, this dog may have just been let out of its cage.
Ethan Wade, Financial Advisor
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).