People are naturally drawn to novelty – the new.
That’s partly why AI has been so blazing hot since the release of ChatGPT – it’s new, it’s exciting.
And of course, this whole effect is amplified by the eyeball-chasing media.
This isn’t to denigrate AI stocks at all…
But to point out that there may be opportunities “beneath the surface” – even huge ones – that most people just aren’t seeing.
Today’s stock pick is a case in point.
It’s a huge stock with a market cap of over $100 billion…
It’s advanced over 75% this year to reach a 5-year high…
And it’s still only trading at a P/E ratio of under 13x.
With stats like that, you would think you’d read about it a bit more in the financial news…
But that hasn’t been the case at all.
Fortunately, the media’s selective bias can be your opportunity…
General Electric Company (GE)
You don’t need an introduction to GE – it’s been a household name for decades. But it’s also a bit of a complex play, with the conglomerate in the process of splitting into different companies, each focusing on energy, aviation, and healthcare, respectively. And this is after having shed various loss-making assets such as locomotives and lighting.
In January this year, the company already spun off its healthcare division into its own independent entity – GE HealthCare Technologies, now trading on the NASDAQ. The company is planning to spin off its GE Verona – its renewable-energy division – sometime in early 2024.
The healthcare spinoff has been highly positive for GE, with its stock having advanced over 75% this year. And the spinoff of its renewable-energy division is also expected to be so, because it would leave GE with the “crown jewel” of its current business – aerospace.
And right now, GE’s biggest aerospace rival – RTX (formerly Raytheon) – is struggling with a huge engine issue which is likely to result in 350 Airbus planes grounded till 2026. This recall could result in a up to $7 billion hit to RTX’s earnings.
This is positive for GE’s stock, which currently trades at a P/E ratio of 12.6x – well below RTX’s 19.9x (even with RTX’s stock falling throughout the year).
As such, this could be a great window of opportunity to get into GE stock before it spins off its energy division and as it continues to benefit from the RTX fallout.
To your wealth,
Felix @ Ace of Investing
