You really can’t fault General Electric (NYSE:GE) for outgrowing its industrial base. After all, considering the solid industrial business lines that it has historically, GE market valuation grew by leaps and bounds especially during the 80s to the 2000s. Because of its relentless pursuit for growth to justify its mammoth market valuation, GE has rapidly grown its business lines to include more and more financial assets and consumer financing. The problem with this strategy, of course, is the great financial crash of 2008. In fact, things got so bad with the consumer lending and finance divisions of General Electric that the losses of these divisions threatened to destroy the company.
Well, now in 2015, it appears that GE has finally learned the lesson of over-expansion. It is on a decided march to completely divest itself of its non-core business units. The latest evidence of this is its recent decision to sell GE Capital Australia to a private investment group for $6.3 billion. This is a tremendous divestment for General Electric, but it is not completely done yet. It still has some finance units. Regardless, this is yet another clear evidence that GE is rediscovering its industrial roots and would like to be once again known as a company that focuses primarily on CT scanners, power turbines, and jet engines.
The GE Capital Australia deal was closed with a private investor group consisting of Deutsche Bank AG and KKR & Company. A key player in that group is $10 billion alternative investment firm Varde Partners. This is a solid move on GE’s part because too many business lines have clouded its general vision. While CEO Jeff Immelt is under a lot of pressure to make GE’s stock match the performance of the market, I believe that these important transformation moves are necessary for GE to regain its vision. Considering the fact that GE’s stock is still underperforming, it may be a good time to get in on this historical powerhouse stock. Once it gets its full industrial act together, watch out.
