When Trian Partners, the activist hedge fund run by Nelson Peltz, disclosed that it had taken a giant position in General Electric, Jim Cramer was intrigued. In fact, when Cramer was doing research for his last book he found that Peltz was the only activist investor who consistently beat the market if investors piggybacked after he had disclosed that he had taken a position.
Many activist money managers can beat the market, but they are only required to disclose holdings once a quarter. That means investors will almost always end up paying a higher price for the same stock, because the stocks will tend to spike once the news breaks.
"But Nelson Peltz is so talented at convincing companies to unlock value that it is often worth buying his favorite holdings, even if you have to buy into the spike that almost always comes with his announcement of a hefty new position," the "Mad Money" host said.
So, Cramer was excited a week and a half ago when Trian Partners announced it had become one of the 10 largest shareholders in General Electric and said the stock was undervalued and underappreciated and predicted it could travel as high as $45 in 2017.
However, just because Peltz has a good track record doesn't mean Cramer thinks investors should buy the stock. So, Cramer did his own homework, and when he did the research he found it easy to understand why Peltz had a bullish long-term view about GE.
The key word is long-term when it comes to GE. The company is due to report on Friday morning, and Cramer's guess is that the quarter could be pretty much in line with what the company has been saying recently.
"That is why I am highlighting the stock today, because I want you to be able to buy GE into weakness if it sells off tomorrow after the quarter, as I expect it might be gripped by this new rotation out of industrials and into the hyper-growth stocks," Cramer said.
GE has recently gone through a revolutionary transformation, and Cramer doesn't think it has received enough credit for what it has done. That is why he thinks General Electric could be the industrial winner among other companies in the group.
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So when the company reports on Friday morning, Cramer thinks the earnings report has the potential to be what he called "ho hum." That means it could potentially disappoint investors who expect a big pop in the stock.
However, Peltz is invested in this company for the long-term. So between GE's oil business and its exposure to China, Cramer expects a good but not a blowout quarter.
"Given that the stock has rallied 20 percent since bottoming in late August, any kind of sub-par performance will likely cause it to sell-off," Cramer said.