1931-1934. 1966-1968. 1973-1974. 1986. 2008-2009. In each of those years, the price of General Electric stock declined by at least 15% greater than the stock market as a whole. This is despite the fact that General Electric was a superior company that outperformed the Dow Jones by three percentage points annually since 1933, 3.5 points annually since 1967, 2.25 points annually since 1973, one percentage point since 1986, and has underperformed the S&P 500 by a percentage point annually since 2009. The 1986 and 2009 valuation periods will eventually become more attractive once GE executes its strategy of selling financial service operations and receives a higher P/E ratio upon becoming a pure play industrial investment.
During every period except 2008-2009, the short-term underperformance of General Electric was due to temporary declines in the demand for industrial equipment that made General Electric’s profits fall further than that of the typical Dow … Read the rest of this article!