I like purchasing stocks of out-of-favor established dividend paying companies that are in a turnaround phase. A little more than two years ago, I purchased Walmart because unlike the critics that saw an imminent Amazon induced bankruptcy, I thought the new CEO was moving the company in the right direction.
I stated, “Walmart is evolving Sam Walton’s 53-year-old business model and is successfully transitioning into Neighborhood Markets and online sales. Their investments to modernize and face the challenges of Amazon are paying off. Walmart will avoid a Sears’ death spiral.” ( https://www.investablewealth.com/holding-walmartfor-now/ )
Over the past two years, Walmart’s CEO Doug McMillon has made a major impact and the stock is up substantially. That’s the effect of a competent CEO, applying new technologies to an established business structure.
I think we’ll see a similar improvement at General Electric (GE) where a new CEO was installed in August. As Walmart was not a Sears, GE is not a Kodak. GE is a conglomerate of good businesses that have been extremely mismanaged for at least a decade.
Under new management, GE will raise cash by selling off non-strategic business units, allowing competent management to focus efforts on improving profitability at the remaining core businesses. It won’t happen overnight, but like Walmart, the transition plan is in place. I suspect within 24 months GE will be hailed as a turnaround success. (see above chart )
DISCLOSURE: I maintain long positions in both WMT and GE.
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