It’s hard to imagine a stock more out of favor these days than General Electric (GE). After a 44% decline last year, investors have been running from the stock like the plague. As a perfect example, this week marked the deadline for institutional investors to file their quarterly holdings report (13F). Based on an analysis from Bloomberg, institutional investors sold more than 126 million GE shares during the first quarter. Besides the fact that no other stock in the Industrials sector saw total sales of this magnitude during Q1, this quarter’s institutional investor outflows from GE reversed a string of three straight quarters where institutions were net buyers. In other words, while the stock was falling 44% in 2017, institutions were accumulating GE only to become net sellers after the decline. Isn’t the phrase supposed to be “buy low and sell high”?
The chart below shows the relative strength of GE versus the S&P 500 going all the way back to 1975. As with all of our relative strength charts, a rising line indicates outperformance of GE relative to the S&P 500, while a falling line indicates underperformance. From the early 1980s right on through the turn of the century, GE was a major outperformer. At its peak in 2000, it had outperformed the S&P 500 over 400%. Since that peak just a few months before famous CEO Jack Welch left the company, it has been a brutal 18 years for GE. When the stock made its recent low of $12.83 at the start of the second quarter, the 400% of outperformance had been more than erased, and the stock was now underperforming the S&P 500 by a record low of -50%.
Who knows where GE will go from here, but with the stock already up over 11% in Q2, it would be pretty ironic to see GE hit a generational bottom just as the institutional investor community started to cry uncle.