General Electric: The Recent Report (Rumor) Was Music To My Ears

Summary Points:

- The Wall Street Journal reports that General Electric may evaluating unique options to dispose of major business units.

- When the company reports its Q1 2018 results, I want to hear more about management's "new" capital allocation plans.

- I plan to stay long General Electric. Should you?

It was recently reported that General Electric’s ($GE) management team is now considering several options to dispose of major business units, which could include spin-offs and/or “hybrid” deals with other companies. There are also rumors that the Transportation division could soon be spun off into a separately traded public company. All of this news is music to my ears (more on this below), and the only question that I really have now is, “What took so long?” Since the company’s 2018 Investor Outlook meeting, GE stock has been in a free fall and has significantly underperformed the broader market.

I believe that most (if not all) of the downward pressure for the stock was a direct result of the uncertainty related to what this once-great industrial conglomerate may look like in the years ahead, which is the main reason why I am so encouraged about the recent news - remember, where there's smoke there's fire. In my mind, the company’s path forward is slowly starting to become a little clearer.

Does this make GE shares a buy? No, not necessarily, but it does somewhat change the narrative - that is, major asset sales/spins should be considered positive developments. Let’s take a moment to consider where this company has come from before we jump into where it is (may be) heading.